The Competition and Consumer Protection Commission (CCPC) has published its new Simplified Merger Notification Procedure Guidelines (Guidelines) which are effective from July 2020.
The Guidelines for the first time introduce a Simplified Merger Procedure (Simplified Procedure) for notifiable mergers and acquisitions which do not raise any competition concerns in Ireland. Previously, the CCPC operated an informal procedure whereby it waived some of the information requirements in the merger notification form in cases where no material overlaps or competition concerns arise.
Which mergers or acquisitions can benefit from the Simplified Procedure?
The Simplified Procedure will apply if one or more of the following conditions is met:
- none of the undertakings involved in the merger or acquisition are (potentially) active in the same product or geographic markets or in any upstream or downstream market(s);
- two or more of the undertakings involved are active in the same product or geographic market but their combined market share is less than 15%;
- one or more undertakings involved are active in any market(s) which is upstream or downstream to a market(s) in which another undertaking involved is active, but the market share of each undertaking in each market is less than 25%;
- an undertaking involved, which already has joint control over a company, acquires sole control over that company.
What does the Simplified Procedure look like?
The Guidelines strongly encourage parties to engage in pre-notification discussions with the CCPC to clarify whether a merger or acquisition is suitable for review under the Simplified Procedure and how much information should be included in the merger notification form. The Guidelines also state that pre-notification discussion may result in reduced timelines. However, any view given by the CCPC during pre-notification discussions is not binding.
If one or more of the above conditions are met, the parties can submit a short form merger notification. As with all mergers, the CCPC will publish a notice on its website within 7 days of receipt of a valid notification and third parties have 10 working days from publication to make submissions about the merger or acquisition.
Following expiration of the third party submission deadline, the CCPC will, as soon as practically possible, decide whether to apply the Simplified Procedure or revert to the standard merger notification procedure (Standard Procedure) and, if the Simplified Procedure applies, issue its determination. However, the Guidelines give no indicative time frame within which a determination can be expected and it remains to be seen what "as soon as practically possible" will mean in practice.
What are the circumstances in which the Simplified Procedure does not apply?
The CCPC reserves the right to revert to the Standard Procedure at any point in one of two ways, for example if new information comes to light:
- by issuing a requirement for further information pursuant to section 20(2) of the Competition Act 2002, as amended (Act); and/or
- by declaring the notification to be invalid under section 18(12) of the Act, thus requiring the parties to submit a fresh notification under the Standard Procedure.
The Guidelines set out some examples of the type of situations where a merger or acquisition which in principle qualifies for the Simplified Procedure may nonetheless be reviewed under the Standard Procedure:
- Concentrated Markets: Mergers or acquisitions in already concentrated markets where market share thresholds are less indicative of the intensity of competition;
- Maverick Firms: A merger or acquisition involving a firm that acts as a maverick (ie a firm that competes more vigorously in terms of price, quality, innovation, etc) which could imply a disproportionate reduction in competition depending on the significance of the maverick in the market and the extent to which the merged entity will compete less vigorously;
- Pipeline Products: Mergers or acquisitions involving firms that have potentially important pipeline products, particularly in the digital and pharma sector;
- Neighbouring Markets: The combination of firms active in related or neighbouring markets (ie when the products are complementary or when they are generally purchased by the same set of consumers for the same end use). This is particularly the case where one or more of the undertakings involved holds a market share of 20% or more and there is potential for the merged entity to leverage its position in that market into a neighbouring market where another undertaking involved is active;
- Joint to Sole Control: Where there is a change from joint to sole control and where:
- pre-merger, the controlling shareholders of the joint venture imposed constraints on one another, and thus the joint venture company, which was in, or was soon to be in, competition with the acquiring shareholder; OR
- neither the CCPC nor the European Commission has approved the initial acquisition of joint control;
- Difficult to Determine Market Shares of the undertakings involved;
- Third Party Submission: Where a third party submission received by the CCPC raises serious competition concerns;
- New or Novel Markets or Legal Issues: Mergers or acquisitions in new or novel markets or which raise new or novel legal issues.
The intention of the Simplified Procedure is to shorten review periods for mergers which do not raise competition concerns and to make the process less burdensome for notifying parties. This is clearly a welcome development, but it remains to be seen whether the Simplified Procedure will achieve this aim.
Ultimately, the success of the Simplified Procedure will depend on how quickly the CCPC will confirm in each case that the Simplified Procedure will apply, the extent to which it is considered applicable, how often the CCPC will use its power to revert to the Standard Procedure, and how quickly the determination is issued.
One of the potential difficulties with the new Simplified Procedure is that, to estimate the market shares and thus show that the requirements for using the Simplified Procedure are met, the undertakings involved must identify all potential product and geographic markets which are likely to be impacted by the merger or acquisition. The Guidelines state that, where it is difficult to identify the potential relevant market(s), the CCPC is unlikely to apply the new Simplified Procedure. This is likely to limit the instances in which the Simplified Procedure can be used significantly, particularly in new and emerging markets.
For more information, please get in touch with Dorit McCann or your usual Beauchamps contact.