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Higher Financial Thresholds for Merger Notifications
The Minister for Business, Enterprise and Innovation, Heather Humphries, has laid the Competition Act 2002 (Section 27) Order 2018 (the “Order”) before the Houses of the Oireachtais on 3 October 2018 which will have the effect of increasing the financial thresholds for mergers and acquisitions requiring a notification to the Competition and Consumer Protection Commission (the “CCPC”). This is the first time that a Minister has used its powers under Section 27 of the Competition Acts 2002-2017 (“Competition Act”) while the order continues to await a confirming resolution in the Dáil and the Seanad, this is likely to be completed within the next 21 days.
Previously, notification was required to the CCPC where the aggregate turnover in the State of the undertakings involved was over €50,000,000, and the turnover in the State of at least two of the involved undertakings exceeded €3,000,000. Under the new regime, effective from 1 January 2019, these financial thresholds have increased to €60,000,000 and €10,000,000 respectively.
CCPC practice, like that of the EU Commission, has been to determine whether it has jurisdiction on the date of conclusion of a binding agreement or announcement of a public bid. Therefore, we expect that any binding agreement concluded or public bid announced prior to 1 January 2019 will remain subject to the old financial thresholds.
Context for Change
The new thresholds under the Order follow a public consultation process launched by the Department of Business, Enterprise and Innovation (the “DBEI”), in September 2017, reviewing the existing financial thresholds. The DBEI noted a number of perceived burdens that had arisen for businesses in light of the existing financial thresholds which triggered merger notification. In particular, it recognised the resource implications for businesses in preparing and submitting a merger notification and the uncertainty it could create in a business transaction in circumstance where the merging entities may not have a strong nexus to Ireland.
The DBEI noted that when compared internationally, the Irish financial thresholds were considerably lower than other similar jurisdictions. The DBEI highlighted that in 2015 there were 78 merger notifications, with 67 merger notifications in 2016. By increasing the financial threshold to €10 million in respect of the individual undertakings the DBEI noted that this would reduce this number of merger notifications by 38% (for the years 2015 and 2016). Moreover, none of these mergers that would now fall outside the scope of the financial thresholds appear to have raised any serious issues of competition concerns for the CCPC. This increase in notification trend appears to have continued in 2017 / 2018 and there has been almost a 50% increase in notifications in H1 2018 as compared with H1 2017.
The new financial thresholds are to be welcomed and will reduce the number of mergers that are captured by the CCPC notification requiremen. This will allow the CCPC to better allocate its resources and to focus on the larger mergers (with more of an Irish nexus) and result in fewer business costs when it comes to smaller Irish transactions.