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CCPC Continues Trend of Requiring Behavioural Remedies to Clear Merger Notifications

AUTHOR(S): Kate McKenna
PRACTICE AREA GROUP: EU, Competition and Regulatory
DATE: 19.02.2019

The Irish competition regulator (the “CCPC”) has a track record of requiring behavioural remedies in merger cases which has been continued in the recent CCPC case of Pandagreen / Knockharley Landfill and Natureford. 

By way of background, in 2018 the CCPC accepted commitments in five cases (5% of cases) all of which involved behavioural commitments and this represented a three-fold increase from 2017 where behavioural commitments were required in two cases.  This distinguishes Ireland from other jurisdictions (including the UK and EU) where structural remedies are almost always preferred.

Until now, behavioural commitments accepted by the CCPC have tended to primarily consist of “ring-fencing” commitments to prevent access to competitively sensitive information held by the target about its competitors in the context of post-merger management of the merged firm and / or in a joint venture situation (e.g.  M/18/016 Trinity Mirror/Northern & Shell, M/18/031 Uniphar/SISK Healthcare and M/18/009 BWG/4 Aces). 

However, the CCPC went further recently, requiring detailed access remedies in two separate mergers involving the waste collection and processing sector:

  • In M/18/053 Pandagreen / Knockharley Landfill and Natureford the CCPC imposed a behavioural ‘access remedy’ commitment to address a potential input foreclosure concern, which required the merged firm to keep a certain specified percentage of landfill capacity available to competitors.  This was to address concerns of potential foreclosure of competitors requiring access to two waste landfill sites in Knockharley and Ballynargan.  The CCPC also required the parties to voluntarily notify any future acquisitions of landfill sites (i.e. where the notification thresholds are not met) as well as extensive quarterly reporting and annual certification obligations on the purchaser to confirm compliance with the access remedy
     
  • Similarly, in M/18/036 – Enva/Rilta, a behavioural commitment was given at Phase 2 by the merged firm to accept hazardous waste, lubricant oil and hazardous contaminated soil from other parties.  This commitment is similar but arguably less interventionist than the above in that it did not specify a particular percentage of capacity and it only required access to be granted once the third party has complied with a number of strict terms and conditions

These cases were investigated at the same time the CCPC was undertaking a market review of that sector, publishing its findings in September 2018: “The Operation of the Household Waste Collection Market”.  The report noted the increasing concentration in the market and was launched following widespread public concern regarding competition in the market.  Therefore this case may not represent any generally applicable new policy preference on the part of the CCPC and may be explained by the specific circumstances of the sector.

While the CCPC has demonstrated a relatively greater willingness to accept behavioural remedies, this approach continues to set Ireland apart from other competition authorities (for example the European Commission and the CMA in the UK) which tend to favour structural remedies such as divestitures, as a means of maintaining the pre-existing competition in a particular market.  These authorities use behaviour remedies (which seek to regulate the future conduct of a merged firm) only in exceptional circumstances.

On the one hand the willingness of the CCPC to accept behavioural remedies (including at phase 1) can be seen as pragmatic, enabling parties to complete their mergers without a detailed phase 2 investigation, however caution is needed to ensure that such complex remedies are proportionate and continue to remain appropriate as conditions of competition may change during the substantial periods of time which they can remain in place.

This article was co-authored by EU, Competition and Regulatory partner, Kate McKenna and senior associate, Liam Heylin.

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