Coming into line

The Competition Act is now law and practitioners must prepare themselves for its impact. Helen Kelly and Karen Gibbons explain how life will change under the tougher regulations

The Competition Act 2002 was signed into law on 10 April, replacing existing Irish competition and mergers legislation. The changes that the new act will bring about are in many instances similar to those currently being contemplated under European Commission (EC) and UK competition law.
The Minister for Enterprise Trade and Employment (the Minister) is expected to sign the commencement orders relating to most parts of the act in the coming weeks. It is expected, however, that the sections on mergers will be delayed until the Competition Authority has had an opportunity to prepare itself for the increased workload. The new mergers regime is therefore unlikely to apply until the second half of 2002.
New mergers control regime
The merger notification regime will con-tinue to be mandatory, but will be largely depoliticised. Mergers will be notified to the Competition Authority rather than the Minister, as is currently the case, and the Competition Authority has the power to block all such mergers except media mergers, where the Minister retains the power to make the final decision. Increased financial thresholds are contained in the act so that a substantially reduced number of mergers will fall within the scope of Irish merger control rules.
Mergers will be notifiable in the following circumstances:
– where two or more of the undertakings involved in the acquisition carry on business in any part of the island of Ireland
– where any one of the undertakings involved has turnover in the state of not less than e40m (£24.5m)
– where the worldwide turnover of at least two of the undertakings involved is not less than e40m.
This clarification of the application of the thresholds to Irish-generated turnover will see the end of the current requirement to notify many foreign-to-foreign mergers. Where a transaction falls below the relevant turnover thresholds, parties may wish to consider submitting a voluntary notification, depending on the structure of the market in question and the position of the parties to the merger.
The act provides for a two-phase examination process for mergers similar to that provided for in the EC Merger Regulation.
Phase one allows the Competition Authority to make a determination within one month of notification to allow the merger to proceed. This will be the case for mergers that do not give rise to significant competition concerns. Where there are such concerns, the Competition Authority may proceed to a phase two investigation. In such cases, it will have four months to investigate the merger and decide whether it should be cleared or blocked.
The Competition Authority will also have the power to receive and negotiate undertakings or commitments from the parties in order to reduce the impact on competition of an otherwise difficult merger. In such cases, additional time will be allowed for the parties to negotiate the undertakings with the Competition Authority at both the phase one and phase two stages.
The act also introduces a new competition-based test for mergers and removes the public interest or common good criteria for non-media mergers. The new US-style substantive test introduced by the act is whether or not the merger would result in a “substantial lessening of competition” in markets for the goods or services in question in Ireland. The EC is currently reviewing its merger control rules and may decide to implement a similar test. The UK is also proposing to implement the same test in the Enterprise Bill.
Media mergers will be treated differently to all other mergers. A media merger is one with undertakings that are involved in publishing newspapers, periodicals or magazines, sound and/or audio visual broadcasting (except over the internet), or the provision of a broadcast service platform, such as a cable company. The Minister will make the final decision on media mergers following delivery to the Minister of the Competition Authority's report, which the Minister can overrule on public interest grounds. The public interest criteria includes: the strength and competitiveness of media business indigenous to the state; the concentration of ownership of titles; the diversity of views in Irish society; the maintenance of cultural diversity; and the position in the media generally of any of the undertakings involved.
Provision is made for increased transparency of the merger process, with the Competition Authority publishing a notice of receipt of notifications and inviting submissions by third parties. The Competition Authority will then publish a decision setting out its ruling and the reasons for its decision.
A special appeals process is also proposed in the act, whereby the parties to a merger may appeal a decision of the Competition Authority to the High Court on an accelerated basis. A further appeal on a point of law may be made to the Supreme Court.
Cartels, anticompetitive agreements and abuse of dominance
While the substantive law on anticompetitive agreements and abuse of a dominant position in Ireland remains the same, the act will introduce new enforcement procedures.
It will no longer be possible to notify an agreement to the Competition Authority for approval; instead, businesses will be responsible for ensuring that their agreements comply with competition rules. The Competition Authority will, however, provide some guidance in the form of notices and declarations. This is in line with the draft modernisation regulation proposed by the EC, which also aims to abolish the system of notification of anticompetitive agreements.
Unlike the situation in the UK, where criminal sanctions for breaches of competition law are contemplated for the first time under the Enterprise Bill, criminal sanctions have existed in Ireland since 1996.
These sanctions are retained under the act, but imprisonment penalties are rebalanced to reflect the gravity of different types of anticompetitive behaviour.
'Hardcore' competition offences such as price-fixing, market-sharing and bid-rigging will attract a maximum term of imprisonment of five years (increased from two years), but there will no longer be an imprisonment term for abuse of a dominant position or more minor anticompetitive agreements. Financial penalties will remain, with maximum fines of up to whichever is the higher of e4m (£2.45m) or 10 per cent of annual turnover.
The act makes a number of changes to the criminal procedures for proving a competition offence and introduces a number of presumptions, which will make the prosecutor's job somewhat easier. Certain technical defences are also contained in the act.
The miscellaneous provisions contained within the act relate to the Competition Authority and its members and includes specific statutory recognition of its independence, its collective nature and its advocacy function.
Helen Kelly is a partner and Karen Gibbons an associate in the EC, Competition and Regulatory Group at Matheson Ormsby Prentice