Jersey: Jersey Merger Control Amendments

Last Updated: 9 October 2019
Article by Sara Johns and Guy Westmacott

In or around 2020, material changes are expected to be made to the Competition (Jersey) Law 2005 (the "Law") as it relates to the regulation of mergers and acquisitions. This briefing examines the nature and extent of the recommendations for overhauling Jersey's merger control regime ("Recommendations") which were published in September 2016 by the Jersey Competition Regulatory Authority (the "JCRA"). We anticipate that these Recommendations will play a key role in shaping the amendments to the Law.

Current merger control regime

Jersey's merger control regime prohibits the implementation of certain mergers and acquisitions until they have been approved by the JCRA. Broadly, this means that (i) share sales involving a change of control of the target, (ii) business sales involving the transfer of the whole or a substantial part of the assets of the target, and (iii) the creation of full function joint ventures, require the prior approval of the JCRA if any of the following jurisdictional thresholds are met or exceeded:

  • Horizontal merger: this is where the parties operate at the same level in a supply chain, and the transaction will result in the combined buyer/target group acquiring or enhancing a share of 25% or more of that market in Jersey;

  • Vertical merger: this is where the parties operate at different levels in the same supply chain in Jersey or elsewhere and one party already has a 25% or more share of supply or purchase in Jersey; or

  • Conglomerate merger: this is where, regardless of whether the parties operate in the same supply chain, one or more of the parties has an existing share of supply or purchase in Jersey of 40% or more - unless either (a) the target has no activities and no tangible / intangible assets in Jersey, or (b) (i) the 40% share of supply belongs to the seller and is not being sold as part of the transaction and (ii) any restrictive covenants / confidentiality provisions in the transaction documents do not last for more than 3 years and are limited to the target's market.

Obtaining the JCRA's prior approval for a transaction meeting any of these prescribed thresholds is a mandatory requirement. If the approval is needed but not obtained before the transaction is implemented, the transaction is automatically void insofar as it purports to transfer Jersey shares and/or assets and the JCRA has no power to approve or validate it retrospectively.

The current merger control regime is discussed in more detail here.

Difficulties with the current regime

As noted by the JCRA in its Recommendations, "the Jersey regime is out of line with best practice, in that the jurisdictional threshold test is currently based on the parties' so-called "share of supply" of particular goods or services in Jersey". The share of supply test is generally more compatible with a voluntary merger control regime (such as that operated in the UK), rather than a mandatory one (as operated in Jersey).

Consequently, the share of supply test has created a number of issues in Jersey since it was introduced in 2005:

  • there has often been uncertainty about whether the jurisdictional thresholds are met because (i) the share of supply test is subjective in nature, and (ii) there is frequently a lack of publicly available information by which the parties to a transaction can estimate their respective and combined shares of supply in the local market;

  • this uncertainty has been compounded by the fact that, as noted above, a transaction requiring the prior approval of the JCRA is automatically void insofar as it purports to transfer Jersey situs shares and assets if the necessary approval is not obtained;

  • as a result, parties (and their advisers) seeking legal certainty have frequently asked the JCRA for its view on whether the jurisdictional thresholds are triggered in any particular case, even though the Law does not allow the JCRA to provide formal guidance in this context upon which the parties can rely; and

  • many transactions, including large multinational transactions requiring merger approval in Europe and elsewhere, have been unintentionally caught by the jurisdictional thresholds, resulting in the JCRA's approval being required even where it is clear from the outset that no substantive competition concerns arise in Jersey.

Mandatory turnover test

The Recommendations propose that the existing share of supply test be replaced with a narrower, more objective test based on turnover (the "Turnover Test"). Under the Turnover Test, the prior approval of the JCRA would be mandatorily required if the following thresholds are met or exceeded:

  • the combined turnover of the parties in the Channel Islands is more than £5 million; and
  • the annual turnover in Jersey of at least two of the parties involved in the transaction is more than £2 million.

Although this mirrors the equivalent test used under Guernsey's current competition law, the Recommendations suggest that the rules for calculating the turnover of financial institutions should more closely reflect the EU, rather than the existing Guernsey, position.

The introduction of a Turnover Test of this nature is aimed at alleviating many of the difficulties that have arisen under the current merger control regime in Jersey. The Recommendations also propose that if the JCRA's approval is needed but not obtained under the new Turnover Test, the transaction in question should not be automatically void if no substantive competition concerns arise from the JCRA's perspective.

Calling in a transaction based on share of supply

Whilst the proposed Turnover Test would appear to be a helpful development, the Recommendations also acknowledge that the proposed monetary thresholds of £5 million (Channel Islands turnover) and £2 million (Jersey turnover) may result in the JCRA not being able to consider the competitive effects of transactions involving smaller businesses which nevertheless have significant local market shares. This raises potential concerns in a small island economy where, depending on the market, the barriers to entry can be high.

Accordingly, the JCRA wishes to have the ability, within a limited period, to call in for review low value transactions involving parties who have a high share of supply in the local market. Although such transactions would not be automatically void in these circumstances, the JCRA would have the power formally to assess the competitive effects of a transaction (and order remedial action where necessary) even if the Turnover Test is not met.

For parties in this position who want certainty that their transaction will not be subject to the JCRA's intervention, the Recommendations in effect open up the possibility of them seeking the JCRA's approval for the deal voluntarily based on their shares of supply and the prevailing conditions in the local market.

Excluded transactions

As noted above, the merger control provisions currently apply to share sales, business sales and full function joint ventures which meet any of the applicable jurisdictional thresholds. However, as part of the Recommendations, the JCRA has suggested that certain specific types of financial services transaction should be removed from the remit of the new merger control rules, including those involving:

  • the temporary holding of securities by financial institutions with a view to resale;
  • the acquisition of control by insolvency officers in an insolvency situation; and
  • operations by financial holding companies which are designed solely to maintain the value of investments.

The proposal to exclude specific types of transaction in this way, if adopted in the changes to the Law, will help to reduce the number of cases requiring the JCRA's approval and increase the ease and speed with which such transactions can be implemented in the island.

Simpler, cheaper process

At present, the overall process for obtaining the JCRA's approval for a transaction generally takes approximately 6 weeks from submission of the pre-notification draft of the application to the JCRA, assuming all relevant information is provided to the JCRA in a timely fashion and no material competition law issues arise.

Under the Recommendations, the JCRA has proposed the introduction of shorter prescribed form application and a shorter timetable for approval. This would apply to all notifiable transactions if it is clear to the JCRA during the pre-notification phase that no competition concerns are likely to arise (albeit that the

JCRA would reserve the right to require a full submission if any such concerns materialised during its assessment). The associated filing fee payable to the JCRA in respect of the new short form application would also be reduced.

Although the Recommendations contain no details in terms of the likely reductions to the timetable and the filing fee, by way of comparison the existing fast track application procedure which is available in Guernsey for credit and financial institutions takes approximately 3 weeks and the reduced fee is £500.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions