1.1) A recent consideration for dealmakers to take into account is the changes to Irish competition law which will provide strengthened merger control powers for the Competition and Consumer Protection Commission (the "CCPC") to 'call in' or compel notification of 'below threshold' transactions and not subject to mandatory notification. This new regime has been flagged as being particularly relevant for deals in the tech and pharma sectors (where targets may have great potential but remain below the mandatory turnover thresholds) or small concentrated markets and require dealmakers to build in additional time to obtain the necessary approvals. However, companies in the tech and pharma sectors are not the only ones who need to be vigilant. The CCPC have previously reviewed 'below threshold' deals eg, in Eason / Argosy, and Matheson has been increasingly advising on this issue recently. As such, the new regime is to a large extent formalising the powers of the CCPC and enabling easier review of such transactions.
1.2) The Competition (Amendment) Bill 2022 (the “Bill") was published in February this year and was approved by the Parliament this week, with enactment expected in the coming days once signed into law by the President. One of the key changes includes new merger control powers for the CCPC to compel notification and potentially unwind ‘below threshold’ mergers that are not subject to mandatory notification.
1.3) This article provides an overview of the CCPC's new powers under the Bill (eg, 'call-in' and unwinding powers); the positions taken by other national competition authorities ("NCAs") in respect of 'below threshold' transactions; and the key takeaways for businesses in light of these impending changes under the Bill.
2) New Powers under the Competition (Amendment) Bill 2022
2.1) Power to compel notification of ‘below-threshold’ transactions
The Bill provides the CCPC with powers to require notification of ‘below threshold’ transactions that are not subject to the mandatory notification requirement, but which may still impact competition in the State. Under Section 18(1) of the Competition Act 2002 (as amended) (the "Act"), the financial thresholds for mandatory notification of transactions to the CCPC are as follows:
- where the aggregate turnover in the State of the undertakings involved is not less than €60 million; and
- where the turnover in the State of each of two or more of the undertakings involved is not less than €10 million.
Under the Bill, the CCPC may compel notification of ‘below-threshold’ transactions within 60 working days of one of the following specified events:
- the date on which one of the undertakings involved in the merger or acquisition publicly announces an intention to make a public bid or a public bid is made but not yet accepted;
- the date on which the CCPC becomes aware that the undertakings involved in the merger or acquisition have entered into an agreement the result of which will, if the agreement is implemented, be that the merger or acquisition occurs;
- the date on which the merger or acquisition is put into effect.
This long period of time means that dealmakers will need to get comfortable (and possibly engage with the CCPC) with the competition impact of the deal even where the financial thresholds are not met (particularly with CCPC also getting interim orders / unwinding powers as described below).
The date from which CCPC could seek to exercise this and its other new merger control powers is unclear. However, the working assumption is that the CCPC will only be able to exercise these new powers from the date of enactment of the Bill and will be prohibited from exercising these powers in relation to transactions (including ‘below threshold’ transactions) that have completed before the date of enactment of the Bill due to Irish constitutional issues.
2.2) Power to impose interim orders in respect of notified transactions
The Bill also provides the CCPC with powers to impose interim orders in respect of transactions that have been notified to it (including ‘below threshold’ transactions) where it considers it appropriate to do so. These interim measures include measures to refrain from implementing / further implementing a transaction; or measures to mitigate the effects of any steps already taken to implement the transaction (eg, the safeguarding of any assets or obligations as to the carrying-on of any activities).
The new powers contained in the Bill allow the CCPC to order an undertaking to take positive steps (eg, by giving access), as well as issue an order preventing an undertaking from doing something (ie, integrating as part of the merger or acquisition to be put into effect). Companies also have the option to appeal interim orders in respect of notified transactions to the High Court.
These appear to be similar in substance to ‘interim enforcement orders’ issued by the UK Competition and Markets Authority (the "CMA") in respect of both completed and non-completed transactions eg, in the Facebook (as Meta then was), Inc / Giphy, Inc. acquisition. There, the CMA imposed an initial enforcement order to prevent the further integration of the transaction while its review was ongoing and later decided to fine Meta over £50 million after taking the view that Meta had twice failed to comply with the order. The European Commission also demonstrated the use of similar powers in the Illumina / Grail case in 2021, which involved the breach of the 'stand-still' obligation under the EU Merger Regulation ie, where parties complete a transaction prior to clearance.
2.3) Power to 'unwind' completed transactions
Lastly, the Bill provides the CCPC with the power to unwind or dissolve transactions where the CCPC finds that the result of the transaction would be to substantially lessen competition in markets in the State. Where it is not possible to unwind or dissolve the merger or acquisition, under the Bill, the CCPC can determine that the undertakings involved in the merger or acquisition shall take such steps as are appropriate to achieve restoration as far as practicable to the situation prevailing before the merger or acquisition was put into effect.
2.4) Other Powers
Businesses will also need to take note of the fact that the Bill provides for a new ‘gun-jumping’ offence for breach of the ‘stand-still’ obligation under Section 19 of the Act. This supplements the current Irish ‘gun-jumping’ offence of failure to notify prior to completion (which the Bill also now envisages to apply where parties fail to notify a ‘below-threshold’ transaction that the CCPC has required it to notify). Gun-jumping is a criminal offence, however there has only been one criminal conviction for gun-jumping recorded in the State (Armalou Holdings).
The new Bill also allows companies to refuse to notify the merger or acquisition (however not clear how strategic this approach would be) .
Going forward, and following the enactment of the Bill, dealmakers will need to think carefully about competition implications, even if the transaction is below the relevant financial thresholds.
In terms of the overall competition policy framework, it is important to note that the new measures in respect to 'below threshold' transactions are being seen as an attempt to monitor the tech and pharma sectors in particular, given the perception of businesses in these sectors pursuing rapid large scale growth through the acquisition of smaller entities in recent years.