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Thursday, 25th April 2024 |
| Competition Authority powers bolstered by 2002 Competition Act |
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| Alan McCarthy reviews the Competition Act, 2002 which came into force in July 2002, repealing earlier Irish competition legislation. |
What are the main prohibitions under the Act? There are two basic prohibitions (i.e. (i) on any agreement which has the object or effect of preventing, restricting or distorting competition in Ireland or in any part of Ireland; and (ii) on any abuse of a dominant position in Ireland or in any part of Ireland (Prohibitions)).
Has the Act improved the Competition Authority’s ability to bring prosecutions for breaches of the Act? Yes. There is a presumption that the purpose of a price-fixing, market sharing or output controlling agreement between competitors has the object of restricting competition (rebuttable on the balance of probabilities). These are the so-called ‘hard-core’ offences. For non hard-core offences (e.g. restrictive provisions in distribution agreements between non-competitors and abuses of dominant positions), there is no such presumption of guilt.
Are there criminal sanctions for breach of the Prohibitions? Yes. For hard-core offences only, certain executives (such as directors, managers or similar officers) can now be jailed for up to five years, while undertakings and their executives can be fined the greater of €4 million or 10 per cent of worldwide turnover for hard-core or non hard-core offences. Breach of Articles 81 or 82 of the EC Treaty (equivalent to the prohibitions at the EU level) is now a criminal offence in Ireland. Irish courts and (since the Act) the Competition Authority will apply/enforce Articles 81 and 82.
Dawn raid powers of the Competition Authority
The Competition Authority now has more invasive ‘Dawn Raid’ powers such as the use of forcible entry into both business premises and homes with the Garda?. Where an offence carries a potential 5-year prison sentence, the Garda? can arrest and detain suspects for up to twelve hours. The Competition Authority can also summons individuals to give evidence under oath.
What are the civil consequences for breach of the Prohibitions? Aggrieved parties can seek damages, injunctions and declarations in the Circuit Court (as well as the High Court) as a result of companies breaching the Prohibitions. The Competition Authority can seek injunctions and declarations for such breaches.
Can I notify an agreement to the Competition Authority? No. It is now not possible to notify agreements to the Competition Authority for clearance from the prohibition. Only mergers (and associated agreements) can be notified to the Competition Authority.
Mergers
What types of merger are notifiable under the Act? Mergers, acquisitions (including asset acquisitions) and certain joint ventures are notifiable. In most cases, the acquisition of ‘control’ is central to the analysis and this constitutes the ability to exercise ‘decisive influence’ over the key commercial decisions of the target company.
What are the financial thresholds requiring notification of a merger? Each of two or more companies involved in a merger must have at least €40 million turnover worldwide, one company involved must have at least €40 million turnover in Ireland and one of the other companies involved in the merger must carry on business on the island of Ireland (including Northern Ireland). The vendor is not counted as a company involved for turnover purposes.
It is possible to voluntarily notify transactions below these thresholds where there is a serious competition concern in a market in Ireland.
(see Section 4 below).
If any of the companies involved in a merger carries on a media business in Ireland then the merger must be notified irrespective of the turnovers of the companies involved in the merger. (see Section 4 below).
To whom and when is a merger notification made under the Act? A merger notification must be made (within 1 month of the signing of the merger agreement or of the making of a public bid) to the Competition Authority accompanied by a fee of €8,000.
Failure to notify a compulsory merger or to notify it on time is an offence and may lead to fines for officers of the company responsible. A notifiable merger is void if it is completed prior to clearance by the Competition Authority.
What substantive test is applied to a notified merger by the Competition Authority? The test applied by the Competition Authority to a notified merger is whether the merger would ‘substantially lessen competition’ in Ireland. (see Section 3 below).
Other features of the mergers regime under the Act
Procedures are more transparent with publication of the fact of the notification being made in the press while the final decision is also published by the Competition Authority.
There are two phases for the assessment of mergers by the Competition Authority. Phase 1 leads either to a clearance within one month of notification or a referral to a more detailed investigation in Phase 2 possibly taking a further three months. The Competition Authority may either clear absolutely, clear under conditions or prohibit a merger in Phase 2.
Third parties can make submissions to the Competition Authority. The notifying companies may submit proposals to the Competition Authority which may become binding on those companies in order to achieve clearance in Phase 1 or Phase 2. Competition Authority proposals may also become binding on notifying parties.
Media mergers are notified to and assessed by the Competition Authority but are referred to the Minister for possible further analysis.
The Minister has the final decision on whether to clear a media merger. A media merger is one in which any of the companies involved in a merger carries on a media business in Ireland. The Minister applies public interest criteria in reaching a decision.
Merger Procedures, Guidelines and Notification Forms
The Competition Authority has issued Procedures and Guidelines for the assessment of mergers. Two merger Notification Forms (M1 and M2) have also been issued. M1 is for large-scale mergers with an appreciable effect on a market in Ireland and M2 is for mergers with no or a de minimis effect on a market in Ireland. Significant corporate and market information is required to complete M1 or M2.
The ‘substantial lessening of competition’ test entails defining the relevant market together with an analysis of the likely effect of a merger on competition in the relevant market (e.g. whether there is any market overlap as a result of the merger and the risk of adverse consequences for competition on the market as a result of the merger). Vertical integration and conglomerate issues are also relevant to the analysis.
Voluntary filings (i.e. where a merger is below the notification thresholds) may be appropriate if the merger raises serious competition concerns in Ireland. Pre-voluntary notification discussions with the Competition Authority may be helpful in establishing the advisability of making such a voluntary notification in cases of doubt.
An example of a potential concern referred to by the Competition Authority is where a dominant company acquires a smaller rival or new entrant whose turnover is below ?40 million.
Other issues regarding the Act
The legal personality and the independence of the Competition Authority are emphasised.
Specific functions of the Competition Authority are set out including the ability of the Competition Authority to analyse sectors in relation to competition, advising the Government on competition, advising public authorities on competition and informing the public about competition. Currently, the Competition Authority is conducting studies into certain professions, the insurance sector and the banking sector.
The Competition Authority has entered into co-operation agreements with certain statutory bodies (i.e. the Commission for Communications Regulation, the Commission for Energy Regulation, the Commission for Aviation Regulation and the Broadcasting Commission of Ireland). These are designed to facilitate co-operation, avoid duplication of activities and to ensure consistency in decisions.
Conclusions
The Act will significantly improve the Competition Authority’s enforcement powers in relation to anti-competitive practices in Ireland and it is likely to focus on exposing and prosecuting cartels in particular. The Competition Authority will also supervise merger control in Ireland using a competition test and very transparent procedures. All in all, the application of competition law in Ireland will become more focussed and rigorous. |
Alan McCarthy is a senior associate at A&L Goodbody.
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| Article appeared in the March 2003 issue.
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