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The Merger Control
Review
Law Business Research
Fourth Edition
Editor
Ilene Knable Gotts
The Merger Control Review
Reproduced with permission from Law Business Research Ltd.
This article was first published in The Merger Control Review, 4th edition
(published in July 2013 – editor Ilene Knable Gotts).
For further information please [email protected]
The Merger Control Review
Fourth Edition
EditorIlene Knable Gotts
Law Business Research Ltd
ThE MERGERs and acquIsITIons REvIEw
ThE REsTRucTuRInG REvIEw
ThE PRIvaTE coMPETITIon EnFoRcEMEnT REvIEw
ThE dIsPuTE REsoLuTIon REvIEw
ThE EMPLoyMEnT Law REvIEw
ThE PuBLIc coMPETITIon EnFoRcEMEnT REvIEw
ThE BanKInG REGuLaTIon REvIEw
ThE InTERnaTIonaL aRBITRaTIon REvIEw
ThE MERGER conTRoL REvIEw
ThE TEchnoLoGy, MEdIa and TELEcoMMunIcaTIons REvIEw
ThE InwaRd InvEsTMEnT and InTERnaTIonaL TaxaTIon REvIEw
ThE coRPoRaTE GovERnancE REvIEw
ThE coRPoRaTE IMMIGRaTIon REvIEw
ThE InTERnaTIonaL InvEsTIGaTIons REvIEw
ThE PRojEcTs and consTRucTIon REvIEw
ThE InTERnaTIonaL caPITaL MaRKETs REvIEw
The Law Reviews
www.TheLawReviews.co.uk
ThE REaL EsTaTE Law REvIEw
ThE PRIvaTE EquITy REvIEw
ThE EnERGy REGuLaTIon and MaRKETs REvIEw
ThE InTELLEcTuaL PRoPERTy REvIEw
ThE assET ManaGEMEnT REvIEw
ThE PRIvaTE wEaLTh and PRIvaTE cLIEnT REvIEw
ThE MInInG Law REvIEw
ThE ExEcuTIvE REMunERaTIon REvIEw
ThE anTI-BRIBERy and anTI-coRRuPTIon REvIEw
ThE caRTELs and LEnIEncy REvIEw
ThE Tax dIsPuTEs and LITIGaTIon REvIEw
ThE LIFE scIEncEs Law REvIEw
ThE InsuRancE and REInsuRancE Law REvIEw
ThE GovERnMEnT PRocuREMEnT REvIEw
ThE doMInancE and MonoPoLIEs REvIEw
PuBLIshER Gideon Roberton
BusInEss dEvELoPMEnT ManaGERs adam sargent, nick Barette
MaRKETInG ManaGERs Katherine jablonowska, Thomas Lee, james spearing
PuBLIshInG assIsTanT Lucy Brewer
PRoducTIon cooRdInaToR Lydia Gerges
hEad oF EdIToRIaL PRoducTIon adam Myers
PRoducTIon EdIToR anne Borthwick
suBEdIToR Tim Beaver
EdIToR-In-chIEF callum campbell
ManaGInG dIREcToR Richard davey
Published in the united Kingdom by Law Business Research Ltd, London
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The publisher acknowledges and thanks the following law firms for their learned assistance throughout the preparation of this book:
accuRa advoKaTPaRTnERsELsKaB
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aLI BudIaRdjo, nuGRoho, REKsodIPuTRo
aLTIus
andERson MŌRI & ToMoTsunE
andREas nEocLEous & co LLc
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BREdIn PRaT
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GIannI, oRIGonI, GRIPPo, caPPELLI & PaRTnERs
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Acknowledgements
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jEFF LEonG, Poon & wonG
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KInG & wood MaLLEsons
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sTRachan PaRTnERs
TavERnIER TschanZ
ToRys LLP
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wIEsnER & asocIados aBoGados
wILMER cuTLER PIcKERInG haLE and doRR LLP
wILson sonsInI GoodRIch & RosaTI, LLP
wonGPaRTnERshIP LLP
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ConTenTs
Editor’s Preface ...................................................................................................ix Ilene Knable Gotts
Chapter 1 ausTRaLIa .............................................................................. 1Peter Armitage, Amanda Tesvic and Ross Zaurrini
Chapter 2 BELGIuM ............................................................................... 17Carmen Verdonck and Jenna Auwerx
Chapter 3 BosnIa and hERZEGovIna ........................................... 31Rastko Petaković
Chapter 4 BRaZIL.................................................................................... 40Lauro Celidonio Neto, Amadeu Ribeiro and Marcio Dias Soares
Chapter 5 canada ................................................................................. 51Dany H Assaf and Arezou Farivar
Chapter 6 chIna .................................................................................... 66Susan Ning
Chapter 7 coLoMBIa ............................................................................ 75Dario Cadena Lleras and Eduardo A Wiesner
Chapter 8 cosTa RIca .......................................................................... 83Edgar Odio
Chapter 9 cyPRus .................................................................................. 93Elias Neocleous and Ramona Livera
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Contents
Chapter 10 dEnMaRK ........................................................................... 103Christina Heiberg-Grevy and Malene Gry-Jensen
Chapter 11 EcuadoR ............................................................................ 111Diego Pérez-Ordóñez and José Urízar
Chapter 12 EuRoPEan unIon ........................................................... 120Mario Todino, Piero Fattori and Alberto Pera
Chapter 13 FInLand.............................................................................. 136Niko Hukkinen and Sari Rasinkangas
Chapter 14 FRancE ................................................................................ 146Hugues Calvet and Olivier Billard
Chapter 15 GERMany ............................................................................ 165Götz Drauz and Michael Rosenthal
Chapter 16 Ghana ................................................................................. 175Rosa Kudoadzi and Esaa Elorm Adzo Acolatse
Chapter 17 GREEcE ................................................................................ 185Alkiviades C A Psarras
Chapter 18 honG KonG ...................................................................... 195Sharon Henrick, Joshua Cole and Tina Zhuo
Chapter 19 IndIa .................................................................................... 207Rajiv K Luthra and G R Bhatia
Chapter 20 IndonEsIa ......................................................................... 220Theodoor Bakker and Luky I Walalangi
Chapter 21 IRELand .............................................................................. 232Helen Kelly
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Contents
Chapter 22 ITaLy ..................................................................................... 242Rino Caiazzo and Francesca Costantini
Chapter 23 jaPan .................................................................................... 251Yusuke Nakano, Vassili Moussis and Kiyoko Yagami
Chapter 24 KoREa .................................................................................. 264Sai Ree Yun, Seuk Joon Lee, Cecil Saehoon Chung and Kyoung Yeon Kim
Chapter 25 LIThuanIa ......................................................................... 272Giedrius Kolesnikovas and Emil Radzihovsky
Chapter 26 MaLaysIa ............................................................................ 282Jeff Leong
Chapter 27 nEThERLands .................................................................. 292Gerrit Oosterhuis and Weijer VerLoren van Themaat
Chapter 28 nIGERIa ............................................................................... 304Afoke Igwe
Chapter 29 noRway .............................................................................. 317Thea Susanne Skaug and Janne Riveland
Chapter 30 PaKIsTan ............................................................................. 326Mujtaba Jamal
Chapter 31 PoRTuGaL .......................................................................... 335Gonçalo Anastácio and Alberto Saavedra
Chapter 32 RoManIa ............................................................................ 347Carmen Peli and Manuela Lupeanu
Chapter 33 RussIa .................................................................................. 359Evgeny Khokhlov
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Contents
Chapter 34 sERBIa .................................................................................. 369Rastko Petaković
Chapter 35 sInGaPoRE ......................................................................... 380Ameera Ashraf
Chapter 36 souTh aFRIca .................................................................. 389Lee Mendelsohn and Amy van Buuren
Chapter 37 sPaIn .................................................................................... 401Juan Jiménez-Laiglesia, Alfonso Ois, Jorge Masía, Samuel Rivero, Joaquín Hervada and Rafael Maldonado
Chapter 38 swEdEn .............................................................................. 412Fredrik Lindblom and Amir Mohseni
Chapter 39 swITZERLand ................................................................... 419Pascal G Favre and Silvio Venturi
Chapter 40 TaIwan ................................................................................ 428Victor I Chang, Margaret Huang and Jamie C Yang
Chapter 41 TuRKEy ................................................................................ 439Gönenç Gürkaynak and K Korhan Yıldırım
Chapter 42 uKRaInE .............................................................................. 450Dmitry Taranyk and Predrag Krupez
Chapter 43 unITEd KInGdoM .......................................................... 457Michael Rowe and Paul Walter
Chapter 44 unITEd sTaTEs ................................................................. 469Ilene Knable Gotts
Chapter 45 vEnEZuELa ........................................................................ 478Pedro Ignacio Sosa, Ana Karina Gomes, Nizar El Fakih and Vanessa D’Amelio
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Contents
Chapter 46 InTERnaTIonaL MERGER REMEdIEs ......................... 489John Ratliff and Frédéric Louis
Appendix 1 aBouT ThE auThoRs .................................................... 505
Appendix 2 conTRIBuTInG Law FIRMs’ conTacT dETaILs ... 539
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Editor’s PrEfacE
Pre-merger competition review has advanced significantly since its creation in 1976 in the United States. As this book evidences, today almost all competition authorities have a notification process in place – with most requiring pre-merger notification for transactions that meet certain prescribed minimum thresholds. This book provides an overview of the process in 45 jurisdictions as well as a discussion of recent decisions, strategic considerations and likely upcoming developments. The intended readership of this book comprises both in-house and outside counsel who may be involved in the competition review of cross-border transactions.
As shown in further detail in the chapters, some common threads in institutional design underlie most of the merger review mandates, although there are some outliers as well as nuances that necessitate careful consideration when advising clients on a particular transaction. Almost all jurisdictions either already vest exclusive authority to transactions in one agency or are moving in that direction (e.g., Brazil, France and the UK). The US and China may end up being the exceptions in this regard. Most jurisdictions provide for objective monetary size thresholds (e.g., the turnover of the parties, the size of the transaction) to determine whether a filing is required. Germany provides for a de minimis exception for transactions occurring in markets with sales of less than €15 million. There are a few jurisdictions, however, that still use ‘market share’ indicia (e.g., Bosnia and Herzegovina, Colombia, Lithuania, Portugal, Spain, Ukraine and the UK). Most jurisdictions require that both parties have some turnover or nexus to their jurisdiction. However, there are some jurisdictions that take a more expansive view. For instance, Turkey recently issued a decision finding that a joint venture (‘JV’) that produced no effect in Turkish markets was reportable because the JV’s products ‘could be’ imported into Turkey. Germany also takes an expansive view, by adopting as one of its thresholds a transaction of ‘competitively significant influence’. Although a few merger notification jurisdictions remain ‘voluntary’ (e.g., Australia, Singapore, the UK and Venezuela), the vast majority impose mandatory notification requirements.
Almost all jurisdictions require that the notification process be concluded prior to completion (e.g., pre-merger, suspensory regimes), rather than permitting the transaction
Editor’s Preface
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to close as long as notification is made prior to closing. Many jurisdictions can impose a significant fine for failure to notify before closing even where the transaction raises no competition concerns (e.g., Austria, the Netherlands, Romania, Spain and Turkey). Some jurisdictions impose strict time frames within which the parties must file their notification. For instance, Cyprus requires filing within one week of signing of the relevant documents and agreements; and Hungary, Ireland and Romania have a 30-calendar-day time limit from entering into the agreement for filing the notification. Some jurisdictions that mandate filings within specified periods after execution of the agreement also have the authority to impose fines for ‘late’ notifications (e.g., Bosnia and Herzegovina, Serbia) for mandatory pre-merger review by federal antitrust authorities. Most jurisdictions have the ability to impose significant fines for failure to notify or for closing before the end of the waiting period, or both (e.g., United States, Ukraine, Greece, and Portugal).
Most jurisdictions more closely resemble the European Union model than the US model. In these jurisdictions, pre-filing consultations are more common (and even encouraged), parties can offer undertakings during the initial stage to resolve competitive concerns, and there is a set period during the second phase for providing additional information and for the agency to reach a decision. In Japan, however, the Japanese Federal Trade Commission (‘the JFTC’) announced in June 2011 that it would abolish the prior consultation procedure option. When combined with the inability to ‘stop the clock’ on the review periods, counsel may find it more challenging in transactions involving multiple filings to avoid the potential for the entry of conflicting remedies or even a prohibition decision at the end of a JFTC review. Some jurisdictions, such as Croatia, are still aligning their threshold criteria and process with the EU model. There remain some jurisdictions even within the EU that differ procedurally from the EU model. For instance, in Austria the obligation to file can be triggered if only one of the involved undertakings has sales in Austria as long as both parties satisfy a minimum global turnover and have a sizeable combined turnover in Austria.
The role of third parties also varies across jurisdictions. In some jurisdictions (e.g., Japan) there is no explicit right of intervention by third parties, but the authorities can choose to allow it on a case-by-case basis. In contrast, in South Africa, registered trade unions or representatives of employees are even to be provided with a redacted copy of the merger notification and have the right to participate in Tribunal merger hearings, and the Tribunal will typically permit other third parties to participate. Bulgaria has announced a process by which transaction parties even consent to disclosure of their confidential information to third parties. In some jurisdictions (e.g., Australia, the EU and Germany), third parties may file an objection against a clearance.
In almost all jurisdictions, once the authority approves the transaction, it cannot later challenge the transaction’s legality. The US is one significant outlier with no bar for subsequent challenge, even decades following the closing, if the transaction is later believed to have substantially lessened competition. Canada, in contrast, provides a more limited time period for challenging a notified transaction.
As discussed below, it is becoming the norm in large cross-border transactions raising competition concerns for the US, EU and Canadian authorities to work closely with one another during the investigative stages, and even in determining remedies, minimising the potential of arriving at diverging outcomes. Regional cooperation among some of the newer agencies has also become more common; for example, the Argentinian
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authority has worked with Brazil’s CADE, which in turn has worked with Chile and with Portugal. Competition authorities in Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Montenegro, Serbia and Slovenia similarly maintain close ties and cooperate on transactions. Taiwan is part of the Asia-Pacific Economic Cooperation Forum, which shares a database. In transactions not requiring filings in multiple EU jurisdictions, Member States often keep each other informed during the course of an investigation. In addition, transactions not meeting the EU threshold can nevertheless be referred to the Commission in appropriate circumstances. In 2009, the US signed a memorandum of understanding with the Russian Competition Authority to facilitate cooperation; China has ‘consulted’ with the US and EU on some mergers and entered into a cooperation agreement with the US authorities in 2011, and the US has also announced plans to enter into a cooperation agreement with India.
Some jurisdictions (e.g., the EU and Ireland currently) have as their threshold test for pre-merger notification whether there is an acquisition of control. Such jurisdictions will often consider relevant joint control (e.g., the EU) or negative (e.g., veto) control rights to the extent that they may give rise to de jure or de facto control (e.g., Turkey). Minority holdings and concern over ‘creeping acquisitions’, in which an industry may consolidate before the agencies become fully aware, seem to be gaining increased attention in many jurisdictions, such as Australia. Some jurisdictions will consider as reviewable acquisitions in which only 10 per cent interest or less is being acquired (e.g., Serbia for certain financial and insurance mergers), although most jurisdictions have somewhat higher thresholds (e.g., Korea sets the threshold at 15 per cent of a public company and otherwise 20 per cent of a target; and Japan and Russia, at any amount exceeding 20 per cent of the target). This past year, several agencies analysed partial ownership acquisitions on a stand-alone basis as well as in connection with joint ventures (e.g., Canada, China, Cyprus, Finland and Switzerland). Vertical mergers were also the subject of review (and even resulted in some enforcement actions) in a number of jurisdictions (e.g., Canada, China, Sweden and Taiwan). Portugal even viewed as an ‘acquisition’ subject to notification the non-binding transfer of a customer base.
Given the ability of most competition agencies with pre-merger notification laws to delay, and even block, a transaction, it is imperative to take each jurisdiction – small or large, new or mature – seriously. China, for instance, in 2009 blocked the Coca-Cola Company’s proposed acquisition of China Huiyuan Juice Group Limited and imposed conditions on four mergers involving non-Chinese domiciled firms. In Phonak/ReSound (a merger between a Swiss undertaking and a Danish undertaking, each with a German subsidiary), the German Federal Cartel Office blocked the merger worldwide even though less than 10 per cent of each of the undertakings was attributable to Germany. Thus, it is critical from the outset for counsel to develop a comprehensive plan to determine how to navigate the jurisdictions requiring notification, even if the companies operate primarily outside some of the jurisdictions.
For transactions that raise competition issues, the need to plan and to coordinate among counsel has become particularly acute. As discussed in the last chapter, it is no longer prudent to focus merely on the larger mature authorities, with the expectation that other jurisdictions will follow their lead or defer to their review. In the current environment, obtaining the approval of jurisdictions such as Brazil and China can be as important as the approval of the EU or US. Moreover, the need to coordinate is
Editor’s Preface
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particularly acute to the extent that multiple agencies decide to impose conditions on the transaction. Although most jurisdictions indicate that ‘structural’ remedies are preferable to ‘behavioural’ conditions, a number of jurisdictions in the past year imposed a variety of such behavioural remedies (e.g., China, EU, Netherlands, Norway, South Africa, Ukraine and the US). This book should provide a useful starting point in navigating cross-border transactions in the current enforcement environment.
Ilene Knable GottsWachtell, Lipton, Rosen & KatzNew YorkJuly 2013
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Chapter 21
IRELAND
Helen Kelly1
I INTRODUCTION
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).
1 Helen Kelly is a partner at Matheson.2 Council Regulation (EC) No. 139/2004 on the control of concentrations between undertakings.
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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 one-month 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);
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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 the turnover of the undertakings involved and not substantive overlap, such that the high proportion of such mergers is more a factor of the number of financial institutions carrying on business in Ireland and their high turnover, rather than the approach of the Competition Authority to market definition or to any other substantive concern. Within this industry sector, private equity buyers featured strongly in 2012, with nine out of the 33 mergers notified (27 per cent) involving such entities.
Other industry sectors that featured prominently in 2010, 2011 and 2012 include the pharmaceutical sector and the food and drink sector. The latter sector was the subject of six merger control determinations during 2012, and has also produced the only merger control determination that has been the subject of an appeal to date – in August 2008, the Competition Authority prohibited the proposed acquisition by Kerry Group plc of the consumer foods division of the former Dairygold Co-operative (Breeo Foods Limited and Breeo Brands Limited M/08/009). The Competition Authority’s prohibition decision was overturned on appeal by Kerry Group to the High Court, based in part on the Court’s critique of the Competition Authority’s approach to market definition, which had focused on very narrow segments within certain food sectors such as natural and processed cheese. During 2010, the Competition Authority made an application for a priority hearing of its appeal, in turn, to the Supreme Court. However, this application was not granted. At the time of writing, the Supreme Court case is still awaiting a hearing date.
Three of the mergers notified in 2012 were media mergers, compared with five in 2011, eight in 2010 and two in 2009. All media mergers in 2012 were cleared following a Phase I review.
3 A media business means a business of the publication of newspapers or periodicals consisting substantially of news and comment on current affairs; a business of providing a broadcasting service; or a business of providing a broadcasting services platform.
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No Phase II investigations were initiated by the Competition Authority during 2011 or 2012, but there were two short Phase II investigations in the first quarter of 2013 arising from two notifications made in December 2012, namely, Uniphar CMR (M/12/027) and KP Snacks/Top Snacks (M/12/031).
The Competition Authority’s merger treatment of greatest note during 2012 was not mandatorily notifiable to the Competition Authority at all. In Eason/Argosy, the merger would have reduced the number of wholesalers of new books in Ireland from two to one. The parties alerted the Competition Authority of their proposed merger post-signing but subsequently withdrew the merger following a decision by the Competition Authority to commence proceedings against the parties. 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 Competition Authority.
The Competition 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 Competition Authority on seven occasions in the context of three merger cases. The longest period between notification and clearance during 2012, resulting from the 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 II investigation by the Competition Authority in the period 2003–2011 was 113 days.
It is noteworthy that the merger with the potential to have the greatest impact on Ireland in 2012, Ryanair/Aer Lingus, was notified to the European Commission in 2012 with no request for a referral back of jurisdiction to Ireland.
III THE MERGER CONTROL REGIME
Mergers coming within the scope of the Competition Act must be notified within one month of the conclusion of a binding agreement or the making of a public bid. At present, merging parties cannot notify until they have concluded an agreement or made a public bid. As part of the proposed introduction of the Bill, the Competition Authority has proposed changes to the existing notification system whereby merging parties would be able to notify on the basis of a letter of intent or where there has been a public announcement of the intention to make a bid. There is no indication yet as to whether these proposals will be incorporated into the new legislation.
Under the Competition Act, there is a parallel system for merger review as a consequence of the residual application to mergers of Sections 4 and 5 of the Act, which prohibit anti-competitive agreements and abuse of dominance respectively (equivalent at the national level to Articles 101 and 102 of the Treaty on the Functioning of the European Union). If a merger is notified to the Competition Authority and cleared by it, it is immune from a subsequent challenge by the Competition Authority or any third party under Sections 4 and 5. Where a transaction does not meet the relevant turnover thresholds (set out above), Sections 4 and 5 could potentially apply. The Competition Act therefore provides for a voluntary merger notification system for mergers that do
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not meet the thresholds but that may raise competition issues. Once notified, voluntary notifications are dealt with in the same way as mandatory notifications.
The Competition Act provides for a two-phase examination process for mergers. In Phase I, the Competition Authority has an initial period of one month in which to decide whether to allow the merger to be put into effect on the grounds that it would not substantially lessen competition, or to carry out a more detailed investigation. Most Phase I cases take close to the full one-month period, although the Competition Authority is prepared to consider requests for an accelerated investigation period in exceptional cases, including where firms are in financial difficulty. If the Competition Authority makes a formal request for information, the time frame is suspended, and the clock starts de novo on receipt by the Competition Authority of the information requested. Failure to comply with a formal request within the time period specified by the Competition Authority is a criminal offence. The one-month period may be extended to 45 days where the parties and the Competition Authority negotiate undertakings or commitments to secure ‘measures which would ameliorate the effects of the merger’.
If, at the end of Phase I, the Competition Authority is unable to form the view that the proposed merger will not result in a substantial lessening of competition, then a Phase II investigation is initiated. In such cases, the Competition Authority has an additional three months (i.e., a total of four months from notification or receipt of response to a formal information request) within which to further investigate the merger and decide whether it should be cleared, cleared subject to conditions or blocked.
A Phase II investigation, by its nature, involves a more detailed examination by the Competition Authority of the merger. Notifying parties are given an initial period of 21 days to make additional submissions to the Competition Authority. The Revised Merger Procedures provide that the Competition Authority may change this time limit by notice on its website in individual cases, if the circumstances so require. Parties are also likely to receive detailed information requests from the Competition Authority (formal information requests have no effect on timing in Phase II), and may be requested to attend meetings with the Competition Authority to allow it to gather additional information by asking questions directly to the parties. Depending on the case and the industry concerned, the Competition Authority may also request (or the parties may wish to offer) a site visit.
If, after eight weeks from the opening of the Phase II investigation, the Competition Authority is satisfied on the basis of all submissions and information it has received that the result of the merger will not be to substantially lessen competition, it may, at that stage, issue a clearance decision or a clearance subject to conditions. Most Phase II clearance decisions occur at this stage.
Otherwise, the Competition Authority (within an eight-week period or shortly thereafter) furnishes a written assessment to the notifying parties setting out its competition concerns. The written assessment outlines the initial conclusions of the Competition Authority on the relevant product and geographic markets, its competitive assessment of those markets and the key factors that it believes may give rise to a substantial lessening of competition. It also summarises the sources and evidence relied on by the Competition Authority in forming its initial views, including information provided by the parties, market enquiries and third party submissions.
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At the same time, the notifying parties are given access to the Competition Authority’s file of documents in accordance with the criteria set out in its publication regarding the Procedures for Access to the File in Merger Cases. The Competition Authority may withhold access to or delete information from certain documents either to protect confidentiality (i.e., to protect the identity of a third party or confidential business information) or because the document is stated to be an ‘internal document of the Competition Authority’. An ‘internal document’ is one related to discussions or communications within the Competition Authority itself (e.g., between the staff and the members), between the Competition Authority and other government departments or bodies, or between the Competition Authority and other competition authorities (e.g., the European Commission or another national authority).
The notifying parties must respond to the Competition Authority’s written assessment within three weeks of receipt if they wish to contest the issues raised by the Competition Authority. As soon as possible after furnishing the assessment, and at the latest 10 weeks after the determination to open the Phase II investigation, the notifying parties may request the opportunity to make an oral submission.
The Revised Merger Procedures envisage that all-party hearings will no longer take place, but notifying parties and interested third parties may be entitled to make oral submissions in Phase II.
The Competition Authority has sought to have included in the Bill changes to certain timelines, including the extension of the Phase II consideration period from three months to four months, and the introduction of a ‘stop the clock’ provision for formal information requests equivalent to that under Phase I.
Additional procedures apply in respect of media mergers. Under the current regime, if the Competition Authority clears a media merger at the end of Phase I, the Minister may, within 10 days and under Section 22 of the Competition Act, direct the Competition Authority to carry out a Phase II investigation. If, on completion of a Phase II investigation the Competition Authority clears a media merger (with or without conditions), the Minister may, within 30 days and having regard to the relevant criteria as defined in Section 23(10), order that the media merger be put into effect (with or without conditions) or may not be put into effect. Such an order of the Minister is then placed before each house of the Parliament and, if a resolution annulling the order is passed by either House within 21 days, the order is annulled. If the order is annulled, the Competition Authority’s Phase II determination has effect. As discussed, the media merger regime will be altered pursuant to the provisions of the Bill.
Should the proposed legislation implement the proposals contained in the Report of the Advisory Group on Media Mergers (‘the Report’), parties will require a separate approval from the Minister for Communications prior to implementation of a media merger. The Report suggests a two-phase system for media merger review, in which Phase I would last until 30 days after the date of notification to the Minister for Communications or after the decision of the Competition Authority, the European Commission or the Broadcasting Authority of Ireland, whichever is the later (i.e., effectively a two-month period for mergers notified to the Competition Authority). At the end of this period, the Minister for Communications may decide to approve the media merger on the basis that it does not contravene the public interest test, approve the media merger with conditions or proceed to a Phase II examination.
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Parties to a merger may appeal a decision of the Competition Authority prohibiting a merger or imposing conditions to the High Court on a point of fact or law within one month of the Competition Authority’s determination. The High Court can annul, confirm or confirm with modifications the Competition Authority’s determination.
A further appeal on a point of law only may be made to the Supreme Court. The Competition Act provides no right of appeal against a decision to clear a merger, and third parties are not given a right of appeal under the Act, although a judicial review may be sought of the Competition Authority’s determination. As mentioned above, in September 2008, the Kerry Group successfully appealed the decision of the Competition Authority to block its acquisition of Breeo before the High Court. While the transaction subsequently went ahead, the Competition Authority has initiated an appeal of the High Court decision to the Supreme Court. At the time of writing, the hearing of the appeal is pending.
IV OTHER STRATEGIC CONSIDERATIONS
The Competition Act enables the Competition Authority to enter into arrangements with the competition bodies in other jurisdictions in relation to the exercise of its merger control function. One of the questions on the standard notification form requires the parties to identify the other jurisdictions where the transaction has been or will be filed. In certain circumstances, the Competition Authority seeks the consent of the notifying parties to enable it to discuss the case with competition officials in other jurisdictions where a notification is made and share information with them.
The Competition Authority is very influenced by the work of the International Competition Network, of which it is an active member, and also of the EU, UK and US competition authorities. It also participates in the Advisory Committee on concentrations that must be considered by the European Commission before decisions are made under the EU Merger Regulation.
The new disciplines imposed on the state as a result of the EU/IMF Memorandum of Understanding in November 2010 and a change of government in March 2011 seem to have introduced a possible new commitment to, and focus on, the role of competition and the need for a new, strong merger control regime. One significant step taken during 2012 was the recruitment of new case officers by the Competition Authority.
Only one determination published by the Competition 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 Competition Authority expediting its normal review process from one month to shorter periods, including, on one occasion, to 10 working days, to deal with the timing realities where firms are in liquidation or receivership.
The Competition Authority treats hostile transactions, such as a hostile takeover bid, as imposing an obligation to notify on the offerer or potential purchaser only, thus enabling such merger reviews to be expedited.
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V OUTLOOK AND CONCLUSIONS
The biggest change likely to occur in merger control in 2013 will arise from changes to the Competition Act that are expected to be included in the Bill, which is due to be published in mid-2013. The Bill will:a amalgamate the Competition Authority and the National Consumer Authority; b introduce changes to the media merger control regime to take account of
recommendations contained in the Report; and c implement other changes to merger procedures sought by the Competition
Authority.
The media merger changes are likely to be significant to the extent that they closely follow the Report. The Report suggests a proposed new statutory test to be applied by the relevant minister in a review of media mergers: ‘whether the result of the media merger is likely to be contrary to the public interest in protecting plurality in media business in the State.’ Plurality of the media is defined in the Report as including ‘both diversity of ownership and diversity of content’. The Advisory Group also recommends the adoption of a revised set of ‘relevant criteria’ to be considered in applying the above test, including: a the likely effect of the media merger on plurality; b the undesirability of allowing any one individual or undertaking to hold significant
interests within a single sector or across different sectors of media business in the state;
c the consequences for the promotion of media plurality of the Minister intervening to prevent the merger; and
d the adequacy of other mechanisms to protect the public interest.
The Report recommends that these criteria should be supplemented by more detailed statutory guidelines to be issued by the relevant minister. Such guidelines are intended to assist the undertakings involved in knowing how the Minister will apply the ‘relevant criteria’. It is proposed that the guidelines would contain indicative guidance on levels of media ownership and, in particular, cross-media ownership, which would generally be regarded as unacceptable. They would also provide for concrete indicators of diversity and plurality that might operate as a ‘sort of checklist’ that the parties to a media merger would be invited to address in their notification. Examples given include demographic audience information and market share data, shareholder information, compliance by the parties with industry codes of good practice and whether the parties have a ‘record of truthful, accurate and fair reporting’.
Should the government implement the proposals contained in the Report and reflect comments by the Minister for Communications, parties will require a separate approval from the Minister for Communications prior to implementation of a media merger. The Report suggests a two-phase system for review, in which Phase I would last until 30 days after the date of notification to the Minister or the decision of the Competition Authority, the European Commission or the Broadcasting Authority of Ireland (to which TV and radio mergers must also be notified), whichever is the
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later (i.e., effectively a two-month period for mergers notified to the Competition Authority).
At the end of this period, the Minister may decide to approve the media merger on the basis that it does not contravene the public interest test, approve the media merger with conditions or proceed to a Phase II examination.
It is proposed that Phase II should last no more than four months from the date of the Phase I decision. In addition, at any stage in the process (Phase I or II), the Minister would be entitled to look for further information and extend time limits by the time required to respond.
In the event of a Phase II review, the Report calls for the establishment of a five-person Consultative Panel comprising experts in law, journalism, media, business or economics to advise the Minister on the application of ‘relevant criteria’ (and to replace the existing role of the Competition Authority in this regard).
At the end of Phase II, unless concluded in the intervening period by a ministerial decision, the Minister shall decide whether to approve, approve with conditions or block a media merger.
i Other proposed reforms
In its response to the Department of Jobs, Enterprise and Innovation’s public consultation on a general reform package for the Competition Act, the Competition Authority requested that a number of changes be made to the Competition Act, including changes to the merger control provisions in Part 3.
The most important changes suggested by the Competition Authority include:a Proposals to allow notification in advance of conclusion of a binding agreement
(as is currently the case), allowing notification based on a ‘letter of intent’, for example. In making this proposal, the Competition Authority made reference to the European Commission’s requirement for there to be ‘a good faith intention to conclude an agreement’.
b Proposals to introduce ‘more appropriate sanctions’. At the moment, breach of various elements of Part 3 of the Competition Act, including knowing and wilful failure to notify a notifiable transaction within the statutory one-month period and breach of a provision of a binding commitment or a conditional clearance determination, are criminal offences under the Act. It is, in the Competition Authority’s view, more appropriate that the sanctions for these infringements are civil. The Competition Authority is also seeking civil sanctions for implementation of a transaction prior to clearance for the first time.
c Proposal to include partial investments. At the moment, the Competition Act refers to mergers that involve a change in control. The Competition Authority has noted a suggestion in the literature and case law that there is a case for analysis of partial investments (i.e., those that fall short of control). The Competition Authority makes some tentative proposals for discussion on this issue, although it makes no definitive recommendations.
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d Proposals to extend time limits for review. The Competition Authority has two major suggestions: to extend a Phase II review from three to four months; and to enable it to ‘stop the clock’ during Phase II following a requirement for further information.
The Competition Authority is also undertaking a review of its current merger guidelines, and it is expected that the draft guidelines will be published for consultation mid-2013.
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about the authors
Helen KellyMathesonHelen Kelly is a partner and head of the EU, competition and regulatory law group at Matheson. She has particular expertise in EU and Irish merger control work, and has experience in dealing with large-scale mergers and complex joint venture arrangements under the EU Merger Regulation as well as advising on Irish merger control issues. She has advised on a number of Phase II investigations, including Phase II unconditional and conditional clearances.
Ms Kelly is a graduate of Trinity College Dublin and the London School of Economics, and is a solicitor in Ireland and England and Wales.
Ms Kelly regularly publishes articles and speaks at leading conferences. She has frequently been recognised as one of Ireland’s leading EU competition and regulatory lawyers in international legal reviews.
MAtHeson70 Sir John Rogerson’s QuayDublin 2IrelandTel: +353 1 232 2000Fax: +353 1 232 [email protected]
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