On 20 December 2013, the Irish Competition Authority (the “CA”) issued revised Guidelines for Merger Analysis (the “revised Guidelines” ). The revised Guidelines replace the CA’s previous merger guidelines published in December 2002 (the “2002 Guidelines” ) and follow a consultation on the revisions launched in December 2010 and draft revised Guidelines published in September 2013.
Merger control in Ireland is primarily governed by Part 3 of the Competition Act 2002 as amended, under which the CA must decide whether or not a merger or acquisition substantially lessens competition in any market for goods or services in Ireland.
The revised Guidelines reflect the CA’s own experience of reviewing approximately 600 mergers since 2002 as well as developments in merger control in other jurisdictions, in particular the EU. The key changes in the revised Guidelines are:
- Whilst the 2002 Guidelines presented market definition as a necessary step in the CA’s analysis, the revised Guidelines present it as analytical tool that can assist in the review, but which is not an end in itself. This reflects the fact that in most cases, the CA finds it unnecessary to reach a conclusion on market definition. However, the CA does state that where there is significant horizontal and/or vertical overlap between the merging parties and competition concerns are likely to arise post merger, the CA will normally identify one or more relevant markets in which the merger may result in a substantial lessening of competition.
- In the revised Guidelines, the CA aligns its approach regarding Herfindahl-Hirschman Index (“HHI”) thresholds with that of the European Commission, stating that a post-merger HHI below 1,000 is unlikely to cause concern; and that other than in exceptional circumstances, a post-merger HHI below 2,000 with a delta below 250 is unlikely to cause concern and a post-merger HHI greater than 2,000 with a delta below 150 is unlikely to cause concern . However, whilst the Commission uses these HHI thresholds for horizontal mergers only, and uses higher thresholds for non-horizontal mergers, the CA uses the same HHI thresholds for horizontal and non-horizontal mergers. The CA confirms that it uses HHI thresholds only as a screening device.
- A new discussion of the role of market shares in the CA’s analysis is included in the revised Guidelines although no indications are given of a market share level below which a transaction is unlikely to give rise to competition concerns.
- The discussions of unilateral and co-ordinated effects are expanded, particularly in the context of non-horizontal mergers.
- The discussion of entry and barriers to entry is also considerably expanded. Whilst the 2002 Guidelines stated definitively that entry is considered timely only if it would occur in two years, the position of the revised Guidelines is more nuanced: “While entry that is effective in two years is normally considered timely, the appropriate timeframe for effective new entry will depend on the characteristics and dynamics of the market under consideration” .
- There is a new detailed section on countervailing buyer power in the revised Guidelines.
- The guidance on efficiencies has been extensively redrafted in the revised Guidelines, although some of the substance remains the same. The revised Guidelines group efficiencies into three broad categories: supply-side efficiencies, demand-side efficiencies and dynamic efficiencies and, in line with the Commission’s approach , require that efficiencies be merger specific, verifiable and beneficial to consumers. The revised Guidelines explain that the CA will give less weight to reductions in fixed costs, as these are less likely to be passed through to consumers, and to dynamic efficiencies, as these are less certain to occur and take more time to occur than other efficiencies.
- The guidance on voluntary notifications provided in the 2002 Guidelines has been omitted from the revised Guidelines and has not been replaced.
It would have been helpful had the CA illustrated points in the revised Guidelines by reference to its previous cases or by the use of hypothetical examples. Nonetheless, the revised Guidelines provide useful clarification of the CA’s practice. Now that the CA has provided greater detail on its approach to substantive merger analysis, it is hoped that it will turn its attention to jurisdictional issues. The CA has issued some jurisdictional guidance and explained that guidance can also be sought from the EU Consolidated Jurisdictional Notice . However, there are numerous jurisdictional issues which remain unaddressed.
Contributed by Sheila Tormey, Consultant.
1.Notice N/13/001 dated 20 December 2013.
2.Decision No.N/02/004 dated 16 December 2002.
3. See the European Commission’s Guidelines on the assessment of horizontal mergers (2004/C 31/03), paragraphs 19-21.
4.Paragraph 6.5 of the revised Guidelines.
5.See the European Commission’s Guidelines on the assessment of horizontal mergers (2004/C 31/03), paragraphs 76-88.
6.For example, the Notice in respect of certain terms used in Part 3 of the Competition Act 2002, Decision No.N/02.003.