This article was first published in Competition Law Insight April 2021 edition.
While developments may not always hit the domestic or, indeed, international headlines, life has been anything but mundane in the world of Irish merger control over the last eighteen months or so. The Competition and Consumer Protection Commission (CCPC) has conducted certain lengthy investigations which led to extensive remedies and, in one case, to the withdrawal of a notification. The CPPC has also taken the rare step of rejecting a merger notification as invalid. In addition, this regulator has introduced a new procedure for ‘no-issue’ transactions while adapting its practices in line with the move to remote working. More broadly, certain reforms to the Irish merger control provisions have also been proposed while the UK’s departure from the EU is likely to have a significant impact on the CCPC’s work.
Three recent cases illustrate the potential length of CCPC merger investigations and the consequent need for flexibility on long-stop dates in transaction agreements. (A long-stop date is the time by which, by agreement of the merging parties, all requirements for a transaction need to be fulfilled. If a transaction is not completed by the agreed date, the agreement is terminated, either automatically or upon withdrawal by one of the parties exercising its relevant right.)
ESB/Coillte1: On 12 February 2020, the Electricity Supply Board (ESB), the State-owned electricity provider, and Coillte, a publicly-held company engaged in commercial forestry, notified the CCPC of their proposed joint venture, under Part 3 of the Irish Competition Act, 2002 as amended (the 2002 Act) to develop and construct renewable energy generation facilities in Ireland. As part of this joint venture, the parties proposed to establish special purpose vehicles for each individual renewable energy project.
In March 2020, the CCPC issued a requirement for further information or formal request for information (RFI) to both parties. It did not receive complete responses to the RFI for over six months – a highly unusual delay, as it usually takes parties three or four weeks to respond to an RFI. Although the ESB/Coillte proposed behavioural remedies in November 2020, these proposals did not prevent the CCPC from opening a Phase II investigation in early December. The CCPC’s Phase I investigation thus lasted just under ten months. During its review, the CCPC identified two potential competition concerns regarding the direct or indirect exchange of competitively sensitive information (CSI). The concerns relate to the exchange of information between
- ESB, the joint venture and project partners currently in co-development arrangements with Coillte on the one hand; and
- Coillte and the joint venture regarding third parties seeking access to Coillte-owned land for the purposes of developing and constructing an onshore wind farm in Ireland on the other hand.
In January 2021, the parties submitted proposals aimed at addressing these competition concerns, including: (a) measures to prevent ESB-appointed directors accessing and exchanging CSI between ESB and the joint venture; (b) the appointment of an independent chairperson; (c) measures preventing the exchange of CSI regarding those persons seeking access to Coillte’s land between Coillte and the joint venture; and (d) procedures to ensure that Coillte personnel do not discuss or pass CSI relating to a third party to any director of the joint venture. The CCPC accepted these proposals and cleared the transaction on 5 February 2021. In total, the review process lasted almost 12 months.
Link/Pepper2 : 10 February 2020 saw the notification of the Link Group’s proposed acquisition of Pepper. The Link Group is a multi-national provider of technology-led financial administration solutions (e.g., pension and fund administration). Pepper is an international consumer finance business. In the Republic of Ireland/State, both the Link Group and Pepper are predominantly active in the provision of non-performing loans servicing and financial services outsourcing. Under the Share Purchase Agreement, the long-stop date for CCPC approval and the fulfilment of other pre-conditions precedent was 30 January 2021 at 5 p.m. Irish time.
The CCPC took around five months to complete its Phase I investigation. It was at that point unable to conclude whether the merger would lead to a substantial lessening of competition in any market for goods or services in the State. The CPPC thus opened a Phase II investigation in July 2020 and issued further RFIs the following month. The CCPC’s website does not record any responses to the RFIs being received. Almost a year after notification, on 1 February 2021, the Link Group issued a stock exchange announcement stating that it was not proceeding with the acquisition given that the relevant long-stop date had passed. The notification was withdrawn and the CCPC closed its investigation. While one can only speculate as to the real reasons why the transaction was not completed, one of the merging parties may have become reluctant to proceed and, thus, the CCPC’s lengthy review was not unwelcome.
Berendsen (Elis)/Kings Laundry3 : On 7 August 2018, Elis/Berendsen, a provider of laundry services to the healthcare and hospitality sectors, notified the proposed purchase of its rival, Kings Laundry, to the CCPC. Due to concerns regarding the potential impact of the transaction in both sectors, the CCPC opened a Phase II investigation in spring 2019. Ultimately, Elis/Berendsen committed to an up-front divestiture of key contracts for the supply of linen to public hospitals to a third-party purchaser for the transaction to be approved by the CCPC. On this basis, the CCPC cleared the transaction on 8 July 2019, some 11 months after notification. However, it took a further 12 months to find a suitable purchaser and secure the necessary consents from the relevant hospitals, and the transaction did not close until July 2020 – nearly two years after the deal was notified.
Rejection of Filing
In January 2021, the CCPC rejected the notification of a proposed joint venture between four major Irish retail banks (AIB, Bank of Ireland, KBC Bank Ireland and Permanent TSB). The reported rationale for the joint venture is the creation of a banking app which would allow users to make payments in real time.
The joint venture was notified to the CCPC on a voluntary basis on 8 January 2021. However, having conducted a preliminary analysis, the CCPC took the unusual step on 21 January 2021 of rejecting the notification as invalid and publishing a press release on the matter.4
Rejecting the notification, the CCPC stated that the parties had not provided full details of the transaction, with the result that it was unable to determine whether the joint venture constituted a triggering event, a merger or acquisition within the meaning of the 2002 Act, including a full-function joint venture, and, moreover, whether it should in fact have been notified on a mandatory basis.
That said, the case is noteworthy for the purported use of the voluntary notification regime under the 2002 Act. This regime applies only to mergers or acquisitions, including joint ventures, that involve a change of control, but which do not satisfy the Irish jurisdictional thresholds for mandatory notification. There is no mechanism for the review of transactions which do not involve a change of control, examples for which are the acquisition of non-controlling interests or the establishment of non-full-function joint ventures.
After going back to the drawing board, the parties re-notified their joint venture, now called Synch Payments, to the CCPC on 9 April 2021.5
In July 2020, the CCPC introduced a simplified merger notification procedure aimed at shortening review periods for transactions that do not give rise to competition concerns. The CCPC will apply this new procedure in three scenarios: where there is no horizontal or vertical overlap between the parties; if the combined market shares of the merging parties are less than 15% (in the case of horizontal overlap) or 25% (in the case of vertical overlap); or in a move from joint to sole control.
If the Simplified Procedure is applicable, the parties are not required to complete certain sections of the CCPC’s Merger Notification Form. Parties would not have to provide information on suppliers, customers and competitors in the areas of competitive overlap, for example. In no-overlap cases, there is no requirement to define the relevant market or provide market share estimates. However, the CCPC expressly reserves the right to require full or further information at any point, for example in transactions involving concentrated or neighbouring markets, maverick firms or ‘pipeline’ products. The CCPC may also revert to the standard merger notification procedure by issuing an RFI or by declaring the notification invalid and requiring a fresh notification. In both cases, the effect would be to restart the statutory review timeframe.
Importantly, the CCPC will not issue a confirmation to parties that their transaction qualifies for the new Simplified Procedure until after the expiry of the deadline for third party submissions, usually two weeks after notification. In the six months to January 2021, the CCPC cleared seven mergers under the Simplified Procedure with an average time of 13.4 working days to issue a Phase I decision, compared to an average of 22.9 working days in 2020 under the standard review process.
Covid-19: Electronic Notifications
As a reaction to Government measures aimed at reducing the spread of COVID-19, including restrictions on movement, first introduced in March 2020, the CCPC started to accept electronic merger filings. Previously, filings had to be delivered in hard copy to the CCPC’s office. Notifying parties may now e-mail a filing, together with all supporting documentation, including proof of payment of the notification fee and relevant annexes, to a dedicated mailbox. The e-mail must be received by 4.30 pm on a working day for that day to count as ‘day one’ of the CCPC’s 30 working day Phase I review period.
Brexit – Impact on Merger Control
The CCPC has stated that it anticipates an increase in complex Irish merger notifications as a result of the end of the transition period following the UK’s departure from the EU. Given that UK turnover is now no longer taken into account for the purposes of the EU jurisdictional thresholds under the EU Merger Regulation (EUMR), deals which previously triggered an EU filing may now trigger parallel EU and UK filings, or parallel filings in the UK and in one or more EU Member States. Deals between businesses with significant Irish and UK turnover which previously triggered an EU filing may now instead trigger parallel Irish and UK filings, for example. While the substantive tests of the Irish and UK merger control regimes are similar, the two regimes differ in their processes and timescales. This added complication will need to be borne in mind by would-be merging parties.
Earlier this year, the Department of Enterprise, Trade and Employment (the Department) launched a public consultation on possible changes to certain merger control provisions of the 2002 Act (the Consultation). The Department proposes to amend the 2002 Act to grant the CCPC the power to prosecute gun-jumping on a summary basis. Failure to notify a transaction which falls to be notified under Part 3 of the 2002 Act is an offence under Section 18(9) of the 2002 Act and is a classic example of gun-jumping. Currently, only the Director of Public Prosecutions (DPP) may prosecute this offence, either summarily or on indictment.
As a preliminary point, the Consultation includes, in its description of gun-jumping, putting a notifiable transaction into effect before clearance. This is the most widely understood definition of gun-jumping, including under the EUMR. However, Section 18(9) of the 2002 Act currently penalises only the failure to notify a notifiable transaction and the failure to supply information requested by the CCPC. While a transaction which purports to have been completed without clearance by the CCPC is void under Section 19(2) of the 2002 Act (and may give rise to a substantive competition law infringement under Section 4 and/or 5 of the 2002 Act), the transaction’s implementation is not currently a specific procedural offence separate to the failure to notify. This raises particular issues in the case of transactions which are notified to the CCPC, but which are completed in the absence of CCPC clearance (or deemed clearance). The Department should thus consider whether, as part of the potential reform of the 2002 Act, it is appropriate to amend Section 18(9) to include implementing or completing a notified transaction prior to clearance by the CCPC.
On the specific question raised in the Consultation, increased enforcement powers would, in principle, serve as a deterrent to would-be gun-jumpers and would align the CCPC’s powers with its power under Section 8(9) of the 2002 Act to prosecute Section 4 and 5 offences on a summary basis. That said, under Section 18(9)(a) the maximum penalty on summary conviction is EUR 3,000 (plus daily fines of EUR 300). Therefore, it is questionable whether granting the CCPC summary prosecution powers is the most effective mechanism to counteract the potentially severe (and sometimes irreparable) harm caused by gun-jumping. Prosecutions on indictment by the DPP are more likely to be effective.
Another proposed change is to give the CCPC the power to accept voluntary merger notifications in respect of completed transactions. It is not clear whether this proposal (accepting and reviewing voluntary notifications in respect of completed transactions) is limited to transactions that do not meet the thresholds for notification and that are nonetheless notified post-completion, or is intended to capture transactions that do meet the thresholds, and are only notified post-completion (outside the timeframe set out in Section 18(1A)) of the 2002 Act. We expect there to be a limited appetite from the relevant parties for post-completion notification of below-threshold transactions. If so, the CCPC will be forced to investigate under ordinary competition rules.
Under another proposal in the Consultation, the CCPC would have the power to issue RFIs to third parties in a merger review. This change would formalise the existing process whereby the CCPC requests information and/or views from the merging parties’ customers, suppliers and competitors, or from a vendor in the case of an asset acquisition, on a voluntary basis. If a new specific power is introduced, the 2002 Act should be amended so that failure to respond to such an RFI should have no impact on the statutory timeframe for clearance. This is to remove the possibility that the actions or inactions of third parties (who may well have competing incentives) could adversely impact on the CCPC’s review timetable.
While the CCPC has undoubtedly built a robust merger control regime since the entry into force of the relevant provisions of the 2002 Act, certain improvements are undoubtedly required. Indeed, it is often difficult to resolve various jurisdictional issues since the CCPC has not published comprehensive guidance. Put another way, there is nothing approaching the European Commission’s 2008 Consolidated Jurisdictional Notice regarding the EUMR (CJN) in terms of detailed guidelines on the relevant issues. The CCPC’s approach sometimes tallies with the CJN but, on other occasions, does not. Unfortunately, the CCPC has never publicly specified what elements of the CJN it will follow. It would be obviously be useful to have some clarity on the relevant issues.
Another difficulty is the extraordinary length of time it can take for the CCPC to review notifications that give rise to competition concern. While the length of such reviews must be viewed against, by contrast with the EUMR, the lack of arduous pre-notification scrutiny, there is, nevertheless, significant merit in changing the threshold for triggering a Phase II merger investigation by the CCPC. At present, the test is negative: Section 21(2) of the 2002 Act merely requires the CCPC not to find that the result of the merger or acquisition will not be to substantially lessen competition. Indeed, the timeframe for review in Phase I (which includes the possibility for significant extension where an RFI is issued to the notifying parties) is sufficient to justify the requirement for the CCPC to articulate a credible theory of harm in writing, or at least (positively) identify serious written competition doubts/concerns regarding the merger, before opening a Phase II investigation.
Actioning potential reforms allied to the likely increase in the number of notifications due to both Brexit and to the possibility that various concentrations may well be proposed in markets (i.e. in the hospitality and tourism sectors) most adversely affected by the economic impact of the Covid-19 pandemic means that the CCPC’s merger control ‘in-tray’ will remain full in the short to medium term.
1 Merger Determination M/20/005 – ESB/Coillte (JV) dated 5 February 2021.
2 Merger Notification M/20/003 – Link Group/Pepper, 10 February 2020.
3 Merger Determination M/18/063 – Berendsen (Elis)/Kings Laundry, 8 July 2019.
4 CCPC rejects as invalid merger notification relating to a joint venture between AIB, BOI, PTSB and KBC 21 January 2021.