New notification requirements may affect M&A transactions
Dealmakers must now consider two pieces of legislation which involve notifications for regulatory approval prior to completion of certain transactions, writes Shaun O’Shea of Beauchamps
Competition (Amendment) Act 2022
The Competition (Amendment)
Act 2022, which commenced on 27 September 2023, places powerful new sanctions at the disposal of the Competition and Consumer Protection Commission (CCPC). It gives the CCPC the power to require parties to notify a below mandatory threshold transaction which, in its opinion, has an effect on competition in Ireland.
The current financial thresholds for mandatory notification are combined turnover in Ireland of purchaser and target of at least €60 million, and turnover in Ireland of each of two or more parties of at least €10 million. Consequently, potential notification to CCPC will have to be considered at the outset of every transaction, even where the mandatory notification thresholds have not been exceeded.
This legislation gives the CCPC the power to impose interim measures in respect of transactions that have been notified to it (including below threshold transactions) where it considers that the transaction may have an effect on competition in Ireland. Failure to comply with an interim order is a criminal offence and is subject to a fine of up to €250,000 and a daily default fine of up to €25,000.
In addition, the CCPC may require a transaction which was completed without approval and which it believes substantially lessens competition in Ireland, to be unwound or dissolved or that steps be taken to restore the situation as far as practicable. The Act also introduces a new gun-jumping offence, i.e. where a transaction that should have been notified is implemented prior to clearance from the CCPC.
Screening of Third Country Transactions Act 2023
This legislation is expected to commence in Q2 2024, and establishes a framework for the screening of foreign direct investments into critical utilities and infrastructure sectors. Under this legislation, the prior consent of the Minister for Enterprise, Trade and Employment is required where a transaction meets each of the following criteria:
(a) a third country (i.e. outside the EU, EEA and Switzerland) undertaking or a connected person is a party to the transaction;
(b) the value of the transaction exceeds €2 million;
(c) the transaction relates, directly or indirectly to:
(i) specified critical technologies e.g., artificial intelligence, cybersecurity, aerospace, nanotechnologies and biotechnologies
(ii) the supply of critical inputs including energy, raw materials and food security
(iii) access to/ability to control sensitive information, including personal data; or
(iv) freedom and pluralism of the media.
Similar to the merger control process, the parties cannot complete a transaction until clearance from the Minister has been obtained.
The Minister has 90 days from the date of notification to issue a screening decision which can be extended to 135 days. Failure to notify is a criminal offence with fines of up to €4 million and/or up to five years imprisonment.
In certain circumstances the Minister may review notifiable transactions which have not been notified and may ‘call in’ non-notifiable transactions. The Minister may also call in transactions completed in the 15 months prior to commencement of the call-in provisions of the Act.
The Act is likely to have a significant impact on corporate transactions in Ireland, due to the low financial threshold and the wide range of sectors covered. It is important to note that the UK and the US are third countries under this new regime.