knowledge | 8 May 2020 |
CCPC Introduces Simplified Merger Notification Procedure
On 8 May 2020, the Competition and Consumer Protection Commission (“CCPC”) announced the introduction of its simplified procedure for the notification of mergers that do not raise competition concerns in Ireland (the “Simplified Procedure”).
The announcement follows an 18-month process during which the CCPC held a public consultation on the design of a simplified regime. Details of the Simplified Procedure are set out in guidelines issued by the CCPC (the “Guidelines”). According to the CCPC, the Simplified Procedure “will reduce the time and resources needed to review applicable mergers and acquisitions” and “will be less burdensome for notifying parties.” Deals may be notified under the Simplified Procedure from 1 July 2020.
Which Deals Qualify?
The Guidelines closely follow the approach at EU level, where the European Commission has identified certain categories of mergers as being unlikely to raise competition concerns. Under the Guidelines, the Simplified Procedure will be available in the following circumstances:
- Where the parties are not active (or potentially active) in the same product and geographic markets, or in any market which is upstream or downstream to a market in which another undertaking involved is active or potentially active;
- Where two or more of the undertakings involved in the merger or acquisition are active in the same product and geographic market, but their combined market share is less than 15%;
- Where one or more undertakings involved in the merger or acquisition are active in a market that is upstream or downstream to a market in which another undertaking involved is active, but the market share of each of the undertakings involved in each market is less than 25%; and
- Where an undertaking involved, which already has joint control over a company, is to acquire sole control over that company.
In its consultation document, the CCPC noted that applying the European Commission’s simplified procedure criteria to 219 notifications to the CCPC between 2016 and 2018 indicated that approximately 55% of mergers would qualify if the EU rules were applied here. It can be expected therefore that a substantial percentage of Irish deals will qualify for simplified notification.
Simplified Notification Process
Parties availing of the Simplified Procedure must use the CCPC’s standard notification form, but will not be required to complete certain sections. Specifically, parties will not have to provide detailed information regarding their competitors, customers and suppliers (sections 4.5-4.10 and 7.3 of the notification form). Where parties avail of the Simplified Procedure on the basis that there is no overlap between their activities, they will additionally not be required to respond to sections 4.4, 4.11, 5.1 and 5.2 of the notification form, which require detailed information regarding the industry and products concerned, the parties’ turnover in the State, and estimated market shares.
The CCPC will inform the merging parties as soon as possible after the deadline for third party submissions on the merger (10 working days after notification) whether use of the Simplified Procedure is appropriate. However, it also states that it will provide an “initial indication” of whether the simplified procedure is suitable when publishing the notification on its website within 7 days of notification (publication generally takes place within 1-2 days of notification).
Even where the CCPC has accepted that the Simplified Procedure applies to a deal, it notes that it “may at any point revert to the standard procedure”. Notably, the CCPC says that it may do so by either issuing a statutory request for further information (resetting the CCPC’s statutory review period) or by declaring the notification invalid (requiring fresh notification under the standard procedure).
The CCPC gives a non-exhaustive list of situations where the standard procedure will be appropriate, notwithstanding that the criteria for notification under the Simplified Procedure are technically satisfied:
- Where the merger takes place in a concentrated market;
- Where the merger involves a “maverick firm”;
- Where the merger involves firms that have potentially important pipeline products (in particular in digital and pharmaceutical sectors);
- Where the firms are active in neighbouring markets (in particular where the merger would allow the merged entity to leverage its position into a neighbouring market); and
- For mergers that involve a change from joint to sole control, where: the parents impose constraints on each other and on the jointly controlled undertaking which was, or was soon to be, in competition with the acquiring shareholder; or, significantly, where the original acquisition of joint control was not cleared by the CCPC or the European Commission.
The Guidelines advise that in order to clarify whether a merger is suitable for notification under the Simplified Procedure, parties are “strongly encouraged to engage with the CCPC in pre-notification discussions.” Pre-notification discussions are not currently a prominent feature of the Irish regime, but are very common at EU level, where notifying parties typically engage in substantial contact with the European Commission (including by exchanging drafts of the notification form) before formally notifying a merger. No time limits apply to pre-notification, and the legislative review periods only begin once a transaction is notified. However, the CCPC has said that it “will endeavour to arrange discussions with parties within two working days from receiving contact.” Helpfully, the Guidelines acknowledge that pre-notification discussion “may be less useful” where there is no overlap between the activities of the parties.
How Quickly Will Deals Be Cleared?
If successful, the Simplified Procedure should reduce review periods for no-issue “Phase 1” deals. The CCPC is required to clear mergers within 30 working days of notification (unless it extends this period by requesting information from the merging parties, or initiates a lengthier “Phase 2” review). The CCPC has not indicated how quickly it intends to process deals notified under the Simplified Procedure, but has said it “will endeavour to make a determination as soon as practically possible following the expiration of the deadline for third party submissions” (10 working days after notification of the merger). While this should see a reduction in review times, it should be borne in mind that the highly-encouraged pre-notification discussions will also have to be factored in.
Where, following pre-notification discussions, the CCPC does not agree that the Simplified Procedure applies, or where it reverts to the standard procedure having initially accepted notification under the Simplified Procedure (either resetting the period for review, or requiring re-notification), the time in obtaining clearance may be longer than if the deal had been notified under the standard procedure originally. This is particularly so given that merging parties will not have certainty on whether notification under the Simplified Procedure was appropriate until at least 10 working days post-notification. Merging parties and their advisors will have to weigh this risk when considering whether to notify under the Simplified Procedure.
Also contributed by Ciarán Donohue
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.