Competition law, merger control and State aid in Ireland in the time of Brexit
While Brexit makes the UK a third country for the purposes of EU law, Ireland's proximity (geographically and econonomically) to the UK makes the application of competition law to cross-border trade that more relevant and complex.
Anti-competitive behaviour which may affect trade between Member States is prohibited by Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). At the same time and in parallel, anti-competitive behaviour which only affects competition in Ireland or in any part of Ireland is prohibited by Sections 4 and 5 of the Competition Act 2002 (as amended).
In Ireland, mergers of a certain size must be apporved by the European Commisison (Commission) under the EU Merger Regulation. Smaller mergers require to be approved by the Competition and Consumer Protection Commission (CCPC) under Part 3 of the Competition Act. The CCPC is responsible for investigating companies and enforcing EU and Irish competition law in Ireland.
The following are the key features of competition law in Ireland
Anti-competitive behaviour in Ireland
Article 101(1) TFEU prohibits agreements between undertakings which may affect trade between Member States (including Ireland) and which have as their object or effect the restriction of competition in the internal market.
Section 4 of the Competition Act prohibits agreements between undertakings which have as their object or effect the restriction of competition in the State or in any part of the State.
Certain limited efficiencies can justify conduct that might otherwise be restrictive of competition and therefore such conduct is compatible behaviour under both Article 101 TFEU and Section 4 of the Competition Act.
In addition to civil consequences (such as voidness of such agreements and damages), a breach of either Article 101 TFEU or Secton 4 of the Competition Act can lead to criminal fines of up to 10% of a company's turnover and, for cartels, prison for individuals for up to 10 years under the Competition Act.
Abuse of dominance in Ireland
Article 102 TFEU prohibits any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it in so far as it may affect trade between Member States (including Ireland).
Section 5 of the Competition Act prohibits an abuse by one or more undertakings of a dominant position in Ireland or in any part of Ireland.
In addition to civil consequences (such as damages), a breach of either Article 102 TFEU or Secton 5 of the Competition Act can lead to criminal fines of up to 10% of a company's turnover under the Competition Act.
The Irish Courts are central in the enforcement of competition law in Ireland as only they (for the time being) can make decisions that there has been a breach of EU or Irish competition law and only they can impose fines/impose sanctions for such breaches.
ECN+ will add to the civil consequences in Ireland of a breach of Article 101(1) TFEU (and possibly Sections 4 and 5 of the Competition Act). It is anticipated that the CCPC will be granted wider powers of enforcement when it is (due to be) implemented by February 2021.
Merger control in Ireland
(a) EU merger control thresholds
The Commission in principle only examines larger mergers with an EU dimension (i.e. those that reach certain turnover thresholds).
There are two alternative ways to reach turnover thresholds for EU dimension.
The first alternative requires:
- a combined worldwide turnover of all the merging firms of over €5bn
- an EU-wide turnover for each of at least two of the firms of over €250m
The second alternative requires:
- a worldwide turnover of all the merging firms of over €2.5bn
- a combined turnover of all the merging firms of over €100m in each of at least 3 Member States
- a turnover of over €25m for each of at least two of the firms in each of the 3 Member States included under (4 above)
- EU-wide turnover of each of at least two firms of more than €100m
In both alternatives, an EU dimension is not met if each of the firms archives more than 2/3rds of its EU-wide turnover in one and the same Member State (e.g. in Ireland).
The merger cannot be completed until Commission has approved the merger and failure to notify the Commission can lead to substantial fines
Smaller mergers which do not have an EU dimension may fall instead under the remit of Member States' competition authorities (e.g. to the CCPC under Part 3 of the Competition Act). There is a referral mechanism which allows Member State authorities (e.g. the CCPC) and the Commission to transfer the case between themselves, both at the request of the companies involved and of the Member States authorities. This allows companies to benefit from a one-stop-shop review and to allocate the case to the most appropriate authority.
(b) Irish merger control thresholds
- in relation to a merger, in the most recent financial year:
- the aggregate turnover in Ireland of the merging firms is at least €60m
- the turnover in Ireland of each of 2 or more of the merging firms is at least €10m
- a merger is a media merger
Each of the merging firms must notify the CCPC and cannot complete until the CCPC has approved the merger. Failure to notify the CCPC can lead to substantial fines (though only the Irish Courts can impose such fines).
The removal of UK turnover from Member State turnover calculations as a result of Brexit may have an impact on the number of mergers notified to the Commission.
State aid in Ireland
Under Articles 107-109 TFEU, State aid constitutes an advantage in any form conferred on a selective basis to undertakings by national public authorities in Member States (e.g. Irish public authorities). Subsidies granted to individuals or general measures open to all firms are not covered by State aid (e.g. general taxation measures or employment legislation). State aid measures have the following features:
State aid measures have the following features:
- an intervention by the Irish State or through Irish State resources (e.g. grants, interest and tax reliefs or guarantees)
- the intervention gives the recipient an advantage on a selective basis, (e.g. to specific firms or to firms in specific regions)
- competition has been (or may be) distorted
- the intervention is likely to affect trade between Member States
Despite the general prohibition of State aid, in some circumstances Irish government interventions can be necessary for a well-functioning/equitable economy. Therefore, the TFEU leaves room for a number of policy objectives for which State aid can be considered compatible (e.g. a serious disturbance in the economy of a Member State (such as due to COVID-19)) but usually a prior notification to and approval by the Commission is required before such State aid can be granted.
For more information on this topic please contact Alan McCarthy, Partner or any member of the EU, Competition & Procurement team.
Date published: 23 November 2020