Tuesday 11 December 2018

Competition watchdog's low threshold hitting M&A deals

Deals which satisfy certain turnover thresholds in Ireland must be notified to the CCPC for its approval if the deal is to proceed. (Stock picture)
Deals which satisfy certain turnover thresholds in Ireland must be notified to the CCPC for its approval if the deal is to proceed. (Stock picture)

John Meade

Recent years have witnessed a significant increase in M&A activity in Ireland. This is reflected in the growing number of deals which have been notified to the Competition Regulator, the Competition and Consumer Protection Commission (CCPC). Deals which satisfy certain turnover thresholds in Ireland must be notified to the CCPC for its approval if the deal is to proceed.

The CCPC recently announced that in 2017 a total of 72 transactions were notified to the CCPC, an increase of 7.5pc on the number of transactions notified to the regulator in 2016.

The transactions notified involved an estimated aggregate turnover of €56m within the State.

Increased M&A activity, however, is not the only reason for the increased activity at the regulatory level.

The thresholds which trigger a filing requirement to the CCPC which were introduced in 2014 are set at very low levels. In practice, any acquisition by a company with group turnover in Ireland of at least €47m of a company which has €3m turnover or more in Ireland must be notified to the CCPC.

These thresholds catch a lot of transactions, the vast majority of which will raise no competition issues for the regulator. The parties, however, will have to deal with the delay, practicalities and costs of a filing (a filing fee of €8,000 plus legal costs), whilst an understaffed mergers division in the CCPC will spend unnecessary time on non-issue cases.

This situation has been the subject of much criticism from the business community in Ireland (and abroad). Some companies have contacted the CCPC directly to express their concerns and frustration. At the same time, there are concerns that some companies may not be complying with the rules. In any case, the rules should be amended to reflect in more realistic terms threshold requirements which will be more likely to catch the scale and nature of transaction which requires regulatory review in Ireland.

The appropriateness of the current financial thresholds and whether the thresholds should be adjusted upwards was the subject of a public consultation organised by the Department of Business, Enterprise and Innovation in late 2017. Hopefully this will result in a more practical outcome for companies and the regulator.

At the other end of the spectrum of merger control, Brexit may result in more cross-border deals which may require mergers approval in a number of countries and Ireland and the UK in particular. Parties to such transactions will need to plan their regulatory strategy well in advance, both in order to ensure that they obtain all necessary regulatory approvals and that they do so within a time frame that also works commercially.

That said, these are the type of transactions that the CCPC should be able to focus on rather than spending time on small-scale deals which will very rarely raise competition issues in practice.

John Meade is a solicitor practising in EU and Competition Law. He advises companies on Merger Control in Ireland, the UK and the EU

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