Three key takeaways from Ireland's new simplified merger control procedure

Ireland’s new simplified merger control procedure comes into effect from 1 July 2020 and will be a welcome (if not revolutionary) development for businesses active in M&A in this jurisdiction.

The new national simplified procedure is similar to the regime in place for mergers notified at EU level, and the intention is to allow for a shorter review period and reduce the information requirements for parties notifying their transactions the Competition and Consumer Protection Commission (“CCPC”). This should make the merger control process less burdensome for notifying parties, at least in straightforward non-issues transactions.

It is expected that the proportion of notifications benefitting from the simplified procedure will be about 50%, which is likely to reduce overall average clearance times for all transactions. The current average clearance time in these straightforward (i.e. non-extended Phase 1 investigations) in recent years stands at about 25 working days.

Here are some of the key takeaways:

Takeaway 1: Only certain types of transaction qualify for the simplified procedure

The CCPC’s role in Irish merger control is to ensure that transactions don’t result in a substantial lessening of competition, and the new simplified procedure aims to filter out certain categories of cases that tend not to raise competition concerns. The key factor that determines whether a transaction can benefit from the simplified procedure is an absence of “competitive overlap” between the parties (or at least a very limited competitive overlap).  As a result, the parties to a transaction must assess the extent to which the purchaser and target compete with one another, and assess their respective market shares in any relevant product of geographic markets prior to notifying the CCPC using the simplified procedure.

For example, there will likely be an absence of competitive overlap where a private equity firm expands into new product or services markets by acquiring new targets that are unlike others already in their portfolios. The extent of competitive overlap is also likely to be limited in the acquisition of a small local business where the target operates in a different geographic market to that of the purchaser. However this will depend on the dynamics of the particular market and whether it can be defined locally or regionally.

Another category of case that can benefit from the simplified procedure (albeit one that will arise less often in practice) is where there is a change from joint control to sole control in a business. This will typically arise where joint ventures split up and its operations are taken over by one of the parties, which tends not to have an adverse effect on competition in the market. 

Takeaway 2: The exclusions can raise uncertainty as to the application of the simplified procedure

Despite the introduction of the simplified procedure, there will almost inevitably be some uncertainty for parties who notify their transaction under it, particularly those involving complex markets. Uncertainly is likely to arise: 

(i)                  in determining the extent of the competitive overlap between the entities involved in the transaction, and

(ii)                based on the number of exceptions by which the CCPC can choose to disapply the simplified procedure.

In many cases, the deployment of an exclusion by the CCPC will likely be due to a misapplication of the simplified procedure by the parties in the first place. For example, the CCPC can determine that parties cannot benefit from the simplified procedure in transactions where it is difficult to identify market shares, or where the entities involved operate in closely related or “neighbouring” markets.

Other exclusions that can be deployed by the CCPC include cases which involve:

So-called “maverick firms”,  i.e. a firm that behaves in a manner that differs from the industry norm. This is because their exit from a market can mean an increased risk of anti-competitive effects.

Third party submissions raising serious competition concerns. In practice, the CCPC will have particular regard to well-founded submissions made by customers or competitors with "on the ground” knowledge of the relevant market.

Businesses with potentially important pipeline products, particularly innovative ones in the digital and pharmaceutical sectors.

New or novel markets or new or novel legal issues. This is likely to arise in newly emerging digital markets or services or in e-commerce.

If the CCPC does choose to deploy one of the exclusions, it can revert to the standard notification procedure either by: 

(i)                issuing a formal requirement for information, which will restart the 30 working day Phase 1 merger investigation period; or

(ii)               declaring a notification made under the simplified procedure invalid.

Therefore, parties should be cautious in relying on the simplified procedure and engage in pre-notification discussions with the CCPC.  Ultimately, the timelines for merger clearance can end up being longer than expected, even where parties try to avail of the simplified procedure. 

Takeaway 3: The simplified procedure is genuinely relatively simple in practice

Parties benefitting from the simplified procedure will still use the CCPC’s (now slightly modified) standard merger notification form. The main difference is that parties using the simplified procedure will now not have to complete certain sections. Previous CCPC practice was to provide waivers to parties for certain sections on an ad-hoc case-by-case basis where there was no overlap between the parties, which is now on a firmer footing as a result the simplified procedure.

Certain sections of the notification form, particularly those relating to areas of overlap or relationship between the parties, can now be “skipped” under the simplified procedure, depending on the extent of overlap between them. These sections tend to be the more onerous elements of the notification form to complete, which often require the most input from senior management, so this will come as a welcome development.  In terms of other procedural matters, there is no actual change to the standard statutory 30 working day Phase 1 timeline for CCPC review, and the normal €8,000 CCPC filing fee also still applies.

For further information or advice, please contact Jon Legorburu or your usual ByrneWallace contact.