A New Era of Intervention by the CCPC in Below Threshold Mergers?

The Irish Government recently published the long-awaited Competition (Amendment) Bill 2022 (Bill). The Bill, which proposes to implement EU Directive 2019/1 (ECN+ Directive), has been the source of much publicity. It will give national competition authorities, including the Competition and Consumer Protection Commission (CCPC), long sought-after powers to impose administrative fines and periodic penalties for breaches of competition law.

An equally interesting aspect of the Bill is that it will amend the Competition Act 2002 (as amended) (2002 Act) to give the CCPC significant new powers in relation to merger control. These powers are likely to have far-reaching consequences for transactions that may have an effect on competition in the Republic of Ireland (the State), regardless of whether the parties meet the turnover thresholds for a mandatory merger notification. Once transposed, the Bill will give the CCPC the ability to:

• Call in below threshold mergers for review
• Impose interim measures
• Initiate proceedings for gun-jumping offences
• Unwind mergers or acquisitions which have completed

Other competition authorities in Europe, such as the European Commission (Commission) and the UK’s Competition and Markets Authority (CMA), have long held similarly far-reaching powers and are using them with increasing vigour. Indeed, the potentially serious implications of powers such as these are illustrated by the Commission’s ongoing review of Illumina/Grail and the recent CMA decision in Facebook, Inc (now Meta Platforms, Inc)/Giphy, Inc, both of which may provide a template for the CCPC’s use of its new powers.

Problematic mergers may be slipping through the CCPC’s net

Under the 2002 Act, proposed transactions which reach the relevant turnover thresholds in the State[1] must be notified to, and cleared by, the CCPC before they are put into effect. If a transaction does not meet the turnover thresholds, the parties have the option of submitting a voluntary notification.

However, the CCPC does not currently have the power to require parties to notify a below threshold merger, even if the transaction gives rise to competition law concerns. In such circumstances, the CCPC’s practice to date has been to engage with the parties and ask them to submit a voluntary notification. For example, in Kantar Media/NewsAccess, the parties submitted a voluntary notification after the CCPC raised concerns that the transaction would remove Kantar’s closest competitor. This transaction did not meet the mandatory reporting thresholds and came to the CCPC’s attention through its own market intelligence. Had the parties not agreed to submit a voluntary notification, the CCPC’s only option would have been to open an investigation into a suspected breach of competition law.

The CCPC also does not have the ability to impose interim measures to prevent a notified transaction from closing prior to the CCPC issuing a clearance determination. Instead, the CCPC would need to initiate court proceedings to obtain an injunction to restrain the implementation of the transaction. Under the 2002 Act, the only consequence of ‘gun-jumping’ in the case of a notified transaction is that the transaction is deemed ‘void’ under Irish law, such voidness being ‘cured’ once the CCPC issues its clearance determination.

The Bill seeks to close the gaps in the CCPC’s merger control toolkit

The Bill will give the CCPC the powers to:

• Require transactions to be notified where the merger or acquisition may, in the CCPC’s opinion, “have an effect on competition in markets for goods or services in the State”
• Impose interim measures on parties involved in a notified merger which may have an effect on competition in the State, including requiring the parties to refrain from taking any steps to implement the transaction and/or to take any action to mitigate any steps already taken to put a transaction into effect
• Take summary proceedings for gun-jumping offences, which shall be broadened to include putting into effect, or taking steps to put into effect, a notified transaction
• Unwind mergers or acquisitions which have completed, and which have substantially lessened competition

Therefore, the Bill proposes to radically overhaul and significantly strengthen the CCPC’s merger control powers and provides a platform for the CCPC to potentially follow the approach of other competition authorities to investigating and intervening in below threshold mergers.

Recent intervention by the EU Commission and the CMA may provide a template for the CCPC

The Commission’s ongoing investigation into Illumina/Grail illustrates the potential fallout from competition authority scrutiny of below threshold mergers.

The Illumina/Grail case marks the first time the Commission used the referral mechanism under Article 22 of the EU Merger Regulation (EUMR). This mechanism allows EU Member States to refer to the Commission a transaction falling below the EUMR turnover thresholds or indeed the Member State merger control thresholds. Following a Phase I review, the Commission identified competition concerns in relation to next generation sequencing based cancer detection tests, despite Grail not generating turnover in Europe. Commitments offered by Illumina did not address the Commission’s concerns, and it decided to open an in-depth Phase II investigation. Nonetheless, Illumina announced that it had completed the acquisition of Grail while the Commission’s Phase II review was ongoing. In response, the Commission opened a gun-jumping investigation and adopted interim measures requiring Illumina and Grail to remain separate pending the conclusion of its review. This marks the first occasion the Commission has imposed interim measures in the context of a merger control investigation.

This case clearly demonstrates the possible significant impact of regulatory intervention in below threshold mergers. It is also illustrative of the wider trend of increased intervention by competition regulators throughout Europe driven by concerns about harm to innovation and “killer acquisitions” in certain sectors, particularly the tech and life sciences sectors. For example, the CMA recently asserted jurisdiction over the Facebook, Inc (now Meta Platforms, Inc)/Giphy, Inc. acquisition (based on the share of supply test), even though Giphy did not generate any turnover in the UK and the transaction had already completed. The CMA imposed an initial enforcement order (IEO) 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 IEO. Ultimately, the CMA found that the only effective remedy was the full divestiture of Giphy.

The Bill gives the CCPC the necessary powers to follow-suit and these cases may provide a template for the CCPC’s use of its new powers.

Key takeaways for clients

The Bill proposes to overhaul the merger control landscape in Ireland and bring the CCPC’s powers in line with those of other competition authorities in Europe.

Recent cases before the CMA and the Commission are illustrative of the potentially far-reaching consequences for transactions that may have an effect on competition, if the CCPC decides to follow-suit and actively exercise its new powers.

Ireland is well-established as a hub for the tech, fintech and life sciences sectors, and a thriving location for start-up companies. It is possible that any acquisition of SMEs in these sectors by larger multinationals, even where the SME has turnover below the relevant merger control thresholds, could be called in for review by the CCPC and potentially be subject to stringent enforcement measures. Clients should consider early in any transaction process whether the deal could have an effect on competition in the State.

If you would like to discuss any related queries, please contact a member of our Competition & Antitrust team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] A merger or acquisition must be notified to the CCPC where, in the most recent financial year: (i) the combined aggregate turnover in the State of the undertakings involved is not less than €60 million; and (ii) the turnover in the State of each of 2 or more of the undertakings involved is not less than €10 million.